In a notable rebound, global equity markets reached a new all-time high, surpassing their previous record set in February, buoyed by signs of resilience in the US economy, renewed investor optimism, and rising enthusiasm around artificial intelligence-driven gains.

The MSCI All-Country World Index rose by 0.2% to 887.73, just enough to beat its earlier peak of 887.72 recorded earlier this year. While the S&P 500 and Stoxx Europe 600 are still trading more than 2% below their own highs, the broader rally reflects a significant turnaround from the April market slump.

US Economy Continues to Show Strength

Much of the positive momentum stems from upbeat economic indicators in the United States. Key reports recently have shown that the US labour market remains robust, signaling that economic growth is steady despite inflationary pressures and lingering global uncertainties.

Investors are particularly reassured by signs that consumer demand remains resilient, jobless claims are low, and wage growth is stable. These elements suggest that recession risks may be overblown, giving a strong foundation for global equities to rally.

Trade Tensions Persist but No Longer Dampen Market Confidence

Although US-China trade tensions continue to make headlines, they no longer carry the same market-crashing weight as before. Instead, investors are increasingly seeing the ongoing disputes as part of the geopolitical backdrop rather than an imminent threat.

US President Donald Trump’s softened rhetoric on tariffs has also helped. His repeated suggestions that he is willing to negotiate, and recent public comments expressing a personal liking for Chinese President Xi Jinping, signal a more diplomatic approach even amid accusations between Washington and Beijing over breached agreements.

Florian Ielpo, head of macro research at Lombard Odier Investment Managers, summed it up well:

“The trade tariff drama is now increasingly seen for what it is: a massive trade uncertainty rather than a trade crash.”

Artificial Intelligence Gains Fuel Investor Sentiment

Another major driver behind the rally is the surge in AI-related stocks, particularly in the US. Following strong earnings reports from tech giants like Nvidia, Microsoft, and others tied to AI infrastructure, the market enthusiasm around AI has spurred further gains in technology-heavy indices.

Ulrich Urbahn, head of multi-asset strategy and research at Berenberg, highlighted that AI optimism was a key ingredient in pushing global equities higher.

A notable quote from Urbahn adds to the narrative:

“Investors are less scared of Trump given his ‘TACO’ behaviour,” referencing the acronym “Trump Always Chickens Out,” reflecting market perception that Trump’s threats rarely lead to immediate harsh policy implementations.

Impact of a Weaker US Dollar

The recent decline in the US dollar’s value has also added momentum to the rally. A weaker dollar generally makes international assets more valuable when priced in other currencies, which in turn boosts returns for global investors.

This currency trend is particularly helpful for emerging markets and export-heavy economies, adding an extra tailwind to the equity rally.

Global Market Overview

Let’s take a closer look at how various indices and markets are responding:

• MSCI All-Country World Index: Touched 887.73, a new record

• S&P 500: Still 2% below its peak, but rebounding strongly from April

• Stoxx Europe 600: Echoing S&P 500 performance, boosted by tech and industrials

• Asia-Pacific Markets: Mixed, but seeing selective buying in Japan, South Korea, and India

This diversified rebound shows a broad-based improvement in risk appetite, driven not just by the US but also by selective international buying.

US Jobs Data in Focus

Looking ahead, market participants are watching out for key US jobs data due later this week. Analysts expect the numbers to confirm that employment remains strong, which would further validate the resilience of the US economy.

A robust report could:

• Strengthen investor confidence in continued economic growth

• Reduce expectations of aggressive interest rate cuts by the US Fed

• Reinforce global equity market momentum

Conversely, any signs of weakness might trigger short-term volatility but are unlikely to derail the overall positive sentiment.

Conclusion: Global Market Confidence Returns

In conclusion, global equities reaching an all-time high marks a significant shift in investor psychology compared to just two months ago. The market is currently being driven by a combination of factors, including:

• Resilient US economic indicators

• Artificial intelligence optimism

• A softer approach from the US on trade

• A weaker dollar supporting international stock values

While trade tensions between the US and China remain unresolved, the broader market narrative has shifted from fear to strategic caution, with investors increasingly focused on fundamentals and innovation-led growth.

The next few weeks, especially with fresh economic data releases, will be crucial in determining whether this bullish momentum can be sustained. For now, global investors are enjoying a rare moment of synchronised optimism.

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