The year 2023 wasn’t fantastic for the stock markets, as other factors took the spotlight. First, the US dollar dominated, followed by Bitcoin taking center stage. Now, as we kick off 2024, and stock indices have surged to their all-time peaks or close to them. Let’s find out how we’ve fallen in this state.
Stock indices – the Nasdaq, the S&P 500, and the Dow Jones – have experienced substantial growth since the beginning of winter. And if you want to find out which particular shares are currently outperforming others, you can check the page featuring the top stock gainers.
The chart above represents a moderately impressive hike. A 10% increase over almost two months isn’t bad, though not something big-time. Simultaneously, the chart below adds more allure to the situation. Since the beginning of 2023, the Nasdaq index has soared by 60%. Just envision having an index-based fund in your portfolio – those figures are quite appealing. The S&P 500 and Dow Jones results garner less attention but are still commendable.
Of course, these performances can be compared to Bitcoin's surge, with the cryptocurrency having already seen a 160% increase since the start of 2023. However, given the well-known volatility of cryptocurrencies...
Plus, we can't ignore the fact that the overall state of the world economy or certain economic sectors isn't exactly robust (with perhaps artificial intelligence being one of the exceptions). The stock market is on the rise as one of the alternatives to the decline of the US dollar and US bonds’ yield. The chart below illustrates the inverse correlation between the Dollar index and major stock indices over the past couple of years.
However, the eye-catcher for investors these days is the stance of major central banks and their expressed views. Market participants hang on to every word from officials and try to predict when regulators might begin lowering interest rates.
Major central banks appear to be leaning towards a dovish policy. They consistently suggest that markets can anticipate key rate reductions in the coming year at every meeting. Any forecast hinting at an earlier-than-expected interest rate decline tends to drive the stock market.
In simpler terms, stocks may be rising even faster than the reasons for their ascent become evident. If signals from new central bank announcements indicate a delay in changes to monetary policy, it could adversely impact stock investors' portfolios.
