All Global Stock Markets' Total Market Cap Increased by a Record $18 Trillion

Government Fiscal Spending and Monetary Easing Drive Stock Price Rise
Limited Optimism for Next Year's US Interest Rate Hike Announcement and Other Positive Factors

[Image source=AP Yonhap News]

[Asia Economy Reporter Kwon Jaehee] Despite the COVID-19 pandemic this year, the global stock market's market capitalization reached an all-time high. This was driven by overlapping factors such as government fiscal spending and monetary easing in various countries, which led to stock price increases. However, with the U.S. signaling interest rate hikes next year, there are forecasts that the favorable conditions in the global stock market seen this year will not continue into next year.

According to the Nihon Keizai Shimbun on the 31st, the global stock market capitalization increased by approximately $18 trillion (about 21,400 trillion KRW) this year, reaching an all-time high. On the previous day, the Nikkei 225 closed at 28,791.71 on the Tokyo Stock Exchange, marking the highest year-end closing price in 32 years since the peak of the bubble economy in 1989.

The upward trend in the U.S. stock market is also notable. On the 29th (local time), the S&P 500 index on the New York Stock Exchange closed at 4,793.06, up 0.14% (6.71 points). This marked the 70th all-time high this year. The Dow Jones Industrial Average also rose for six consecutive trading days, closing up 0.25% (90.42 points) at 36,488.63.

The Nihon Keizai analyzed, "Low interest rates have driven up asset prices such as housing, leading to a strong recovery in consumption."

Record highs were also seen in European markets such as France and the Netherlands, as well as Asian markets including India and Taiwan. Since the COVID-19 pandemic, capital has been concentrated in semiconductors, information technology (IT), and biotechnology sectors.

Shogo Maekawa, a global market specialist at JP Morgan Asset Management, interpreted, "The combination of fiscal spending, monetary easing, and economic reopening has driven strong stock price increases," adding, "Among the 48 countries comprising the MSCI All Country World Index (ACWI), 21 countries have reached record high stock prices."

Stock price declines this year were limited to eight countries, including Brazil, suffering from inflation, and Hong Kong, where IT stocks fell due to increased control by the Chinese government.

However, there is little expectation that the favorable stock market conditions of this year will continue into next year. This is because the U.S. Federal Reserve (Fed) is expected to move toward a tightening stance following interest rate hikes.

Takahide Kiuchi, senior economist at Nomura Research Institute, forecasted, "Excessive monetary easing caused the expansion of the stock market, but this premise is changing."

In fact, during the quantitative tightening phase from 2017 to 2019, stock prices experienced volatility.

Morgan Stanley predicted, "Considering the prolonged rise in employment costs, it is obvious that corporate profit margins will decline," adding, "With the weakening of fiscal supports such as quantitative easing, a decline in U.S. stocks next year is inevitable."

This content was produced with the assistance of AI translation services.