Global stock markets are breaking out and breaking new highs alongside U.S. equities as they fuel each other’s surge in defiance of gravity. This global momentum is an added bonus for U.S. markets as well. This is because it creates a positive feedback loop that works to propel further gains.
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Broadening Participation Beyond the U.S.
A recent report by Ned Davis Research (NDR) highlights the broadening of the global stock market rally. The overall theme of the report is that international markets have reached or are nearing record highs in synch with U.S. markets. This reinforces confidence that the current upswing isn’t solely driven by the U.S. market.
Serving as a prime example is the MSCI ACWI All-Country World Index (NYSE:ACWI), a benchmark for global stock performance. The index just closed at a fresh all-time high, fueled not just by U.S. performance but by a broader trend.
Strength in Numbers
While the U.S. makes up over 60% of the ACWI index, it was discovered that it isn’t just American dominance lifting the index. The key statistic is that over 75% of the markets within the index have rising 200-day moving averages. This indicates a strong uptrend across a significant portion of the global market.
Looking deeper, nearly 90% of ACWI’s constituent markets are trading above their 200-day moving averages. This level of global participation in the rally hasn’t been seen since 2021.
Emerging Stars and Record Highs
The global rally extends beyond even established markets. Several regions of the world are experiencing record highs, including emerging markets, represented by the MSCI Emerging Markets Index (MSCIEF), and Europe, represented by the Euro Stoxx 50 Index (STOXX). Even Japan’s Nikkei 225, though not yet at its all-time peak, is close to breaching that level after a pullback in April.
Sector performance reflects this global strength as well. With the exception of the energy, real estate, and consumer discretionary sectors, most others are trading near or at record highs.
Global Optimism Fuels U.S. Markets
Tim Hayes, chief global investment strategist at Ned Davis Research, co-authored a report highlighting the global nature of this index confirmation. He emphasizes that the enthusiasm for stocks among international investors remains strong, which bodes well for U.S. markets as well.
This positive sentiment is reflected in the U.S. itself, where both the S&P 500 (SPX) and the Nasdaq Composite (IXIC) are at record highs. While the Dow Jones Industrial Average (DJIA) is lagging slightly, the overall picture remains bullish.
Key Takeaway
The global stock market rally is gaining momentum, with a growing number of international markets joining the upswing. This broad participation and strong investor sentiment create a positive feedback loop that could propel U.S. markets even higher.
