The Phenomenal Year-End Rally: Equities Soar Amidst Rate Cut Expectations
Unprecedented Winning Streak for Equities
In a remarkable display of resilience, the S&P 500, Dow, and Nasdaq have embarked on an extraordinary nine-week winning streak, marking an unprecedented surge in equity markets. This remarkable ascent has not been witnessed since the halcyon days of 2004 for the S&P 500, and 2019 for the Dow and Nasdaq.
Interest Rate Relief Fuels Year-End Rally
The year-end rally gained significant momentum in December as interest rates took a downward turn. The Federal Reserve’s shift from a hawkish stance to a more dovish one has ignited hopes of rate cuts in the near future, providing a much-needed boost to equity markets.
European Equities Shine Bright
European equities have also enjoyed a stellar year, with the pan-European STOXX 600 gaining an impressive 13% in 2023. This remarkable performance is largely attributed to the anticipation that central banks will adopt a more accommodative monetary policy in 2024.
Global Markets Benefit from Falling Bond Yields
The decline in bond yields, driven by expectations of rate cuts, has been a boon for global markets. Investors have flocked to equities, seeking higher returns in an environment of falling interest rates.
UK Market Lags Despite FTSE 100’s Gains
While the FTSE 100 has managed to eke out a modest gain of 3.8% for the year, it has fallen behind its European counterparts. Susannah Streeter, Head of Money and Markets at Hargreaves Lansdown, attributes this underperformance to the allure of Wall Street and the tech-heavy exchanges of New York, which have captured the attention of investors.
British House Prices Face Challenges
In a separate development, British house prices have taken a hit, falling by 1.8% in the twelve months leading up to December. This marks the most significant annual decline since the global financial crisis of 2008, highlighting the challenges facing the UK housing market.
