Recent record highs in global stock markets, fueled by the artificial intelligence (AI) boom and expectations of lower interest rates, have raised concerns about the sustainability of these gains, reports Al-Jarida daily.
The following are the key points:
The European and Japanese Markets — European stock indices, including the STOXX 600, the German DAX, and the French CAC, reached record highs, surpassing previous peaks. Japan’s Nikkei 225 also closed above 39,000 points for the first time, exceeding its previous peak from 1989.
US Stock Market — The S&P 500 and Dow Jones indices reached record levels, with the technology sector leading the gains. Nvidia’s exceptional quarterly results, with a significant increase in revenues and profits, drove optimism in global markets.
Factors Driving Market Gains — Optimism about AI technologies and positive business results contributed to market gains. In Europe, expectations of interest rate cuts by the European Central Bank amid slowing inflation also boosted stock markets.
Concerns about Sustainability — Some analysts express concerns about the sustainability of the market rally. They warn of concentration risks, with a limited number of stocks driving gains. In the US, the dominance of tech stocks like Apple, Microsoft, and Amazon raises questions about market momentum.
Valuation Concerns — Rapidly rising stock valuations pose a risk to markets. Analysts caution that stocks are approaching important technical levels, which may trigger profit-taking. There are also concerns about inflated valuations in the technology sector.
Policy Uncertainty — Policymakers’ stance on interest rates adds to market uncertainty. Some Federal Reserve officials have signaled caution about lowering rates too quickly. The European Central Bank also remains patient in its approach to monetary policy.
Japanese Market Dynamics — Despite the sharp rise in Japanese stocks, concerns remain about underlying fundamentals, including demographics and price deflation. The economy’s technical recession has raised questions about the sustainability of market gains.
Overall, while optimism prevails in global markets, concerns about market dynamics, valuation levels, and policy uncertainties underline the need for caution among investors.
