Artificial Intelligence Boom Pushes Global Stocks to Best First Quarter in Five Years

Global stock markets posted their best first quarter performance in five years as investors backed the artificial intelligence (AI) boom.

Since the start of the year, the MSCI Global Index has risen nearly 8 percentage points, marking the strongest opening three months of 2019.

This performance was driven by a strong rise in the US benchmark S&P 500 Index, which rose 11 points to a record high.

In recent months, driven by the artificial intelligence boom, investors have flocked to large U.S. technology stocks.

Shares of Nvidia, which makes the computer chips needed to support new technologies, have risen 88 percentage points so far this year to a market capitalization of nearly $2.3 trillion.

Strong earnings reports from Silicon Valley giants such as Meta, the owner of Facebook, also drove tech stocks higher, with Meta announcing plans to return $50 billion to its shareholders after reporting record revenues and sharply higher profits last month.

That optimism has spread to other industries, with General Electric, Disney and pharma group Eli Lilly all posting gains of at least 35 percentage points in the first quarter.

Alex Kuptsikevich, senior market analyst at FxPro, said the S&P's growth could continue for "months".

He adds, "This type of rebound occurs in mature bull markets that have gotten enough impetus from the bottom but haven't struggled to move higher."

The US stock market is outpacing the UK, with the benchmark FTSE 100 lagging behind, up just 3 percentage points so far this year.

The London Stock Exchange (LSE) has been trying to stop a large number of companies from moving to New York for more capital.

Building materials company CRH, gaming giant Flutter Entertainment, packaging supplier Smurfit Kappa and travel group Tui are among the companies that have shifted their main listings to the U.S. in recent months.

However, there are signs that the British stock market is beginning to regain ground. The FTSE 100 has risen by 4.2 percentage points in the last month, while the S&P 500 has risen by 3.1 percentage points.

Although there are signs of lingering inflation, prompting the market to cut hopes for a quick Fed rate cut, investor confidence remains strong.

Data released on Friday showed that the Fed's favored inflation rate for personal consumption expenditures (PCE) was 2.5 percentage points in February, up 0.1 percentage points from the previous month.

The figure was in line with expectations due to the impact of higher fuel prices. However, it was still 2 percentage points above the central bank's target.

Speaking at a meeting of the San Francisco Fed on Friday, San Francisco Fed matriarch Jerome Powell said the latest data were "basically in line with our expectations," adding that "we don't need to be worried about growth: "We don't need to rush into cuts."

Fed officials have signaled three rate cuts in 2024, and markets expect the central bank to begin easing monetary policy in June.

Michael Pearce of Oxford Economics said: 'The easing of labor market conditions, stable inflation expectations, and the possibility of future rental deflation lead us to believe that the inflation trend will remain slightly lower this year.

"This should be enough to give the Fed the confidence to start removing some of the tightening later this year, and as much as possible, the tutelage of the economy means that policymakers are in no hurry."

Dan Coatsworth, investment analyst at AJ Bell, says: "Investor sentiment has improved over the past six months thanks to growing expectations of central bank rate cuts.

"Investors are happy to take on more risk, partly driven by lower interest rates on cash savings, which has prompted more people to invest in equities in search of better returns.

"This confidence helps push valuations higher, but it also raises the prospect that if inflation is firmer than expected and the Fed fails to adjust monetary policy soon, then the market may find it difficult to continue its upward march."

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