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Global stocks have closed out their biggest monthly rally in three years, as investors pile into risky assets in the growing belief that the Federal Reserve and other central banks are close to winning their battle with inflation.
The MSCI All-Country World index rose 9% over November, marking the global equities benchmark’s best month since November 2020 when news of a breakthrough in the race to develop a Covid-19 vaccine sent stocks soaring.
In the US, Wall Street’s benchmark S&P 500 index and the technology-dominated Nasdaq Composite posted their best month since July 2022, gaining 8.9% and 10.7%, respectively.
Now that inflation is no longer a problem, the Fed is no longer a problem. That means that risky assets should do better.
The combination paints the picture of a Goldilocks-type of environment.
However, some in the market are concerned that the rally has run too far. Large asset managers have warned recently that valuations are stretched. That means stronger than forecast economic data could also “throw a wrench into the current rally” by reviving fears that the Fed will need to hold rates higher for longer.
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