Rallies from Brazil to Japan and the Standard & Poor’s 500 Index’s first trip above 2,000 sent the value of global equities to a record $66 trillion.
Shares worldwide added more than $2.2 trillion in value since Aug. 7, according to data compiled by Bloomberg. Optimism that central banks will support economic growth sent the MSCI All-Country World Index up 3.8 percent from its low this month. It was little changed at 9:40 a.m. in New York today. The S&P 500 has risen for 10 of the last 13 days and the Nasdaq Composite Index is about 10 percent from an all-time high.
Global markets are surmounting crises in Ukraine, the Gaza Strip and Iraq as investors renew bets that stimulus will revive growth. The Stoxx Europe 600 Index posted its biggest two-day gain since April after European Central Bank President Mario Draghi signaled policy makers may consider introducing an asset-buying plan. Japan’s Topix index is near its highest level since January, rebounding from losses earlier this year.
“Geopolitical events are significant and major new attacks are tragic, but they’re not enough to unsettle the global economic forces in play, especially in America,” said Patrick Spencer, head of U.S. equity sales at Robert W. Baird & Co. in London. “Draghi gave clear indication that he’s standing ready with further measures to stimulate growth and that’s helping overall sentiment.”
The S&P 500 has climbed 0.6 percent over the past two days, closing at 2,000.02 yesterday, after data added to signs the economy is strengthening. U.S. durable-goods orders jumped by the most on record last month and consumer confidence climbed in August to the highest level in almost seven years.
Stocks from Brazil and Saudi Arabia have seen some of the world’s biggest gains in the past month. The Ibovespa is up 7.2 percent this month, led by a rally in state-run companies on speculation President Dilma Rousseff will lose her re-election bid. The Tadawul All Share Index is also up about 7 percent in August as the kingdom prepares to grant foreign investors access to one of the world’s most restricted markets.
The value of equities globally has soared from $25 trillion in March 2009. Stocks were valued at $63 trillion at the 2007 peak, according to data compiled by Bloomberg.
Three rounds of Fed stimulus and record corporate earnings have helped the S&P 500 almost triple from its March 2009 low. At last week’s economic symposium in Jackson Hole, Wyoming, Fed Chair Janet Yellen said the labor market has yet to fully recover from the worst recession since the Great Depression.
Minutes from the U.S. central bank’s July meeting indicated that the Fed is committed to supporting the recovery, even as some policy makers signal a willingness to raise key rates sooner than anticipated. The Fed is on pace to wind down stimulatory bond purchases in October.
“Yes, we are beginning to move away from unconventional policy, QE, towards conventional policy, rates moves,” Andrew Milligan, head of global strategy at Standard Life Investments Ltd., which oversees about $317 billion, said by phone from Edinburgh. “But the only reason central banks are doing this is because they believe growth is sufficiently strong.”
Draghi’s comments at the Jackson Hole conference reinforced speculation that the ECB will start quantitative easing even after cutting interest rates to record lows in June and lining up more cheap loans for banks. Bank of Japan Governor Haruhiko Kuroda told reporters he will keep policy accommodative until price stability is achieved.
The Stoxx 600 has rallied 5.6 percent from its Aug. 8 low, shrugging off concerns the Ukraine conflict is worsening to trade 1.9 percent away from a six-year high. Japan’s Topix has advanced 4.7 percent in the same period.
Since March 2009, the European equities index has surged 117 percent and the Topix has climbed 81 percent. The MSCI gauge of shares worldwide is up 150 percent, while the MSCI Emerging Markets Index rallied 124 percent.
Oliver Wallin, the investment director at Octopus Investments Ltd. in London, said the recent stock gains are making him cautious.
“There’s a sense that markets are a little complacent,” he said by phone. His firm oversees 3.5 billion pounds ($5.8 billion). “There’s quite a lot going on in the background that warrant a bit more concern, yet equity markets don’t seem to be phased at all.”
While the U.S. stock rally is approaching the dot-com bubble of the late 1990s in terms of speed, valuations this time are below where they were then. The U.S. gauge trades at 16.8 times estimated earnings, compared with a multiple of 26 at its March 2000 peak, data compiled by Bloomberg show.
“Valuations are becoming rich in the U.S., but it is not a problem because the economic momentum is good and investors’ sentiment is also positive,” said Guillaume Duchesne, an equity strategist at BGL BNP Paribas SA in Luxembourg. “Equities will continue to be the best asset, but we have recently moved from a liquidity-driven market into a fundamental-driven one. As a result, you need to be more selective, looking for the markets with the strongest fundamentals.”