The stock market rally and crash

SMeanwhile, the Tokyo Stock Exchange was also at its 34-year-old record high.
The autumn stock market rally continues in all major stock markets except China. Moreover, the broad US stock index S&P500 has passed the dream level of 5,000.
The Stockholm Stock Exchange's index for the 30 most traded shares, OMXS30, is also approaching a record level. After this week's stock market rise, only 2 per cent is missing before the stock market record from 4 January 2022 is erased.
Not even this week's unexpectedly high inflation figures from the US were able to shake the stock market mood for a single day before share prices took off again, which is not really surprising as a steady trend is not usually broken by negative news.
The global stock market rally, which has now lasted almost four months, is fuelled by the increased likelihood of a soft landing for the global economy combined with a strong conviction in the stock market that central banks will cut interest rates several times this year.
Another reason is the AI boom that has caused technology stocks around the world to skyrocket so it will be interesting to see what Nvidia's full-year report released today shows, they fell heavily on Wall street already yesterday. Nvidia has rallied 200% in the last 12 months and is fighting with both Amazon and Alphabet for the highest market capitalisation so expectations for the numbers are sky high.
The major exception in the world's stock markets is the Chinese stock market, which this week hit its lowest level in five years.
There are three reasons for the slowdown in China:
- The tense geopolitical atmosphere between West and East, which has also intensified after the Ukraine war, has caused foreign investors to shun Chinese shares.
- The economic performance of the country after the end of the coronavirus restrictions has been surprisingly weak, considering how long China maintained very tight restrictions.
- The property crisis that China is far from resolving. This is perhaps the most important reason for the weak stock market.
It was the Japanese property slump that brought down the Tokyo Stock Exchange in the 1990s and from which it took 34 years to recover, assuming that price peaks are now passed. The Chinese stock market record is now 17 years old. It was set in autumn 2007, just before the Lehman Brothers crash and the subsequent global financial crisis that hit China very hard.
Unless China manages to resolve its property crisis, it is quite possible that, like the Tokyo stock market, it will take another 17 years before we have reason to write about positive stock market records in China.