Markets Update May 2024 - Upswing on the global equity markets reaches new heights

After temporary corrections, the global stock markets have made an impressive turnaround and reached new all-time highs. Two factors were decisive for this market recovery: firstly, the geopolitical risks were quickly priced out once it became clear that neither Iran nor Israel have any interest in a military escalation, at least for the time being. Secondly, interest rate pressure on the markets has eased noticeably. Fewer new jobs than expected and seemingly weaker inflationary pressure in the US caused interest rates to fall, as market participants are now speculating on more interest rate cuts by the Fed this year. On closer analysis of the data, however, the high core inflation rate in the US remains a problem. There are currently no signs that price pressure there is easing quickly and noticeably. Interest rate cuts by the Fed in September are therefore anything but certain. Nevertheless, the stock markets have recovered significantly and developed positive momentum, which is likely to continue in the medium term.

Europe and China show strength

The markets outside the USA have also been in good shape recently. European equities are benefiting from a significant valuation discount compared to the very expensive US equities and an improved global trade and industrial situation. European banks, which have a high weighting in the most important European share indices, are also benefiting from higher interest rates. Chinese stock markets are also currently experiencing a renaissance. The Chinese leadership is endeavouring to stabilize the domestic stock market by buying billions of dollars. The absence of an economic crisis in China has also caused euphoria on the markets. As a result, the important Hang Seng Index was able to make up for the weak start to the year in just a few weeks and is now on a par with the other major global indices for the year as a whole. Overall, current developments suggest that the relative strength of these stock markets could continue despite existing uncertainties.