Key Points
- Global stocks hit record highs, led by the MSCI All-Country World Index.
- Strong U.S. labor data and earnings eased fears of a recession.
- Investors bet on the “TACO” trade, believing Trump will soften tariff threats. AI enthusiasm and Nvidia’s rise fueled market optimism.
- European markets outperformed, boosted by German tax reforms. Trade tensions and high valuations still pose risks to further gains.
Global stock markets reached new record highs, buoyed by signs of a resilient U.S. economy and strong corporate earnings, despite ongoing uncertainty around global trade tensions.
The MSCI All-Country World Index climbed 0.3% to reach 888.24 points, surpassing its previous peak in February. The index’s recovery from its April lows has been driven largely by a more moderate tone from U.S. President Donald Trump on tariffs, along with easing recession fears and solid labor market data in the U.S.
“Everybody was waiting for the U.S. economy to break, but the jobs data shows it’s still strong,” said Benjamin Melman of Edmond de Rothschild Asset Management. He noted that investors are embracing the so-called “TACO” trade — short for “Trump Always Chickens Out” — reflecting a belief that Trump will avoid fully following through on aggressive tariff threats.
Trade tensions between the U.S. and China remain elevated, as both sides accuse each other of backtracking on agreements. President Trump recently described China’s President Xi Jinping as “extremely hard” to negotiate with, adding to uncertainty in the global trading environment.
Nevertheless, optimism around artificial intelligence (AI) and strong first-quarter earnings continue to fuel market momentum. Nvidia Corp. has become the world’s largest company by market capitalization, following a bullish outlook that sparked a surge in AI-related investments.
In Europe, fiscal reforms and attractive stock valuations have made markets more appealing. Germany’s DAX Index surged as the government advanced a €46 billion corporate tax break plan. The Stoxx Europe 600 Index has outperformed the S&P 500 by a record 18 percentage points this year in dollar terms.
However, some analysts warn that markets remain at risk due to unresolved trade issues and high equity valuations.
