Global Equities Weather Recession Concerns, Find Stability in H1 2023

The first half of 2023 witnessed a series of noteworthy events in global equity markets. It encompassed a remarkable upswing in tech stocks, driven by the influence of artificial intelligence (AI). Additionally, there was substantial decline in the commodity market, and a profound banking crash, arguably the most severe since the Lehman Brothers crisis [EasyDNNnews:PaidContentStart]

As we ventured into the first week of a new quarter, markets experienced a slight stumble following a strong performance in the first two quarters of 2023. The S&P 500 displayed a minor decline last week, and Small-Cap stocks fell behind their Large-Cap counterparts in terms of performance.

However, unlike the market turmoil caused by interest rates in 2022, the current situation has been characterized by a prevailing belief that the end of the economic cycle is approaching. Despite this sentiment, the first half of 2023 witnessed a significant rally in the global stock market, amounting to a remarkable USD 6 trillion or 12 per cent increase in overall value. However, there is an underlying sense of caution as this surge appears to be concentrated in a select few, raising concerns about its sustainability.

One notable factor contributing to this positive trend is the AI boom, where the 'Big Tech' giants have experienced substantial growth. Thanks in large part to ChatGPT, the combined market value of Apple, Microsoft, Google's parent company Alphabet, Amazon, and Netflix has surged by 35 per cent to 50 per cent. Additionally, companies like Meta and Tesla have more than doubled in value, while the high demand for semiconductor chips driven by AI technology propelled Nvidia to an impressive 180 per cent increase, briefly placing it among the exclusive group of US companies with a market value surpassing USD 1 trillion.

Concerns over potential monetary policy tightening by central banks led to a 3.09 per cent decline in the pan-European STOXX Europe 600 Index when measured in local currency. As a result, major stock indices experienced declines across various regions. Germany's DAX index dropped 3.37 per cent, France's CAC 40 Index slid 3.89 per cent, Italy's FTSE MIB gave up 1.60 per cent, and the UK's FTSE 100 Index witnessed a decline of 3.65 per cent

In Germany, economic indicators such as industrial production, factory orders, and exports indicated continued weakness in the second quarter. The UK housing market faced the impact of rising mortgage rates, leading to a 2.6 per cent year-over-year drop in house prices in June, marking the largest decline since 2011.

In Japan, stock markets experienced a decline in the past fortnight, with the Nikkei 225 Index losing 2.4 per cent and the broader TOPIX Index down 1.5 per cent. Both indices retreated from their 33-year highs as investors decided to secure profits, particularly in technology stocks that showed significant performance.

Chinese equities also saw a retreat as recent economic data raised concerns about the country's post-pandemic recovery. The Shanghai Stock Exchange Index fell by 0.17 per cent, while the blue-chip CSI 300 lost 0.44 per cent. In Hong Kong, the benchmark Hang Seng Index plunged by 2.91 per cent.

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