From New York to Tokyo, stock markets around the world have rallied in 2023
It’s been a great year for stock markets around the world
Your support helps us to tell the story
From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.
At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.
The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.
Your support makes all the difference.It's been a great year for stock markets around the world.
Wall Street's rally has been front and center, with the U.S. stock market the world's largest and its clear leader in performance in recent years. The S&P 500 is on track to return more than 20% for the third time in the last five years, and its gangbusters performance has brought it back within 2% of its record set at the start of 2022. The Dow Jones Industrial Average closed at a record high Wednesday.
Even in Japan, which has been home to some of the world's most disappointing stocks for decades, the market marched upward to touch its highest level since shortly after its bubble burst in 1989.
Across developed and emerging economies, stocks have powered ahead in 2023 as inflation has regressed, even with wars raging in hotspots around the world. Globally, inflation is likely to ease to 6.9% this year from 8.7% in 2022, according to the International Monetary Fund.
The expectation is for inflation to cool even further next year. That has investors feeling better about the path of interest rates, which have shot higher around much of the world to get inflation under control. Such hopes have been more than enough to offset a slowdown in global economic growth, down to an estimated 3% this year from 3.5% last year, according to the IMF.
This year's glaring exception for global stock markets has been China. The recovery for the world's second-largest economy has faltered, and worries are rising about cracks in its property market. Stocks in Hong Kong have taken a particularly hard hit.
This year's big gains for global markets may carry a downside, though: Some possible future returns may have been pulled forward, limiting the upside from here.
Europe's economy has been flirting with recession for a while, for example, and many economists expect it to remain under pressure in 2024 because of all the hikes to interest rates that have already been pushed through.
And while central banks around the world may be set to cut interest rates later in 2024, which would relieve pressure on the economy and financial system, rates are unlikely to return to the lows that followed the 2008 financial crisis, according to researchers at investment giant Vanguard. That new normal for rates could also hem in returns for stocks and make markets more volatile.
For the next decade, Vanguard says U.S. stocks could return an annualized 4.2% to 6.2%, well below their recent run. It's forecasting stronger potential returns from stocks abroad, both in the emerging and developed worlds.