Global stock markets are reporting their strongest second-quarter performance since 2020, with the MSCI All-World index surging nearly 14% to record highs. This rally is largely attributed to high demand for artificial intelligence-related companies, especially in Asian markets, where indexes in Japan, South Korea, and Taiwan have seen double-digit percentage gains. Japan's Nikkei recorded its best quarter ever with a 38% gain, and South Korea's KOSPI soared over 70%. The S&P 500 is up 14%, and the Nasdaq, boosted by SpaceX's $2 trillion valuation, has gained 20%. This optimistic market sentiment comes alongside a significant shift in expectations for US interest rates, moving from anticipated cuts to potential hikes due to sustained economic strength and persistent inflation. Analysts are noting investors are taking bullish positions at a record pace.
In currency markets, the dollar has emerged as the clear winner, increasing 1.4% against a basket of major currencies. This strength has contributed to gold's largest quarterly fall in over a decade and pushed the Japanese Yen to a 40-year low, trading around 162.23 per dollar, prompting concerns about potential intervention. Oil prices, specifically Brent crude (LCOc1), have dropped 20% due to the gradual reopening of the Strait of Hormuz and a fragile ceasefire between the US and Iran. Federal Reserve Chair Kevin Warsh's focus on inflation has led traders to price in a near-certain rate hike by October, with some economists predicting an increase as early as July.
Simultaneously, the US Supreme Court has issued a landmark ruling that significantly broadens presidential power over independent federal agencies, effectively overturning the 90-year-old "Humphrey's Executor" precedent. This decision allows presidents to remove the heads of most independent federal agencies without needing to provide a reason. However, the Court made a notable exception for Federal Reserve Governor Lisa Cook, ruling 5-4 that she could remain in her position while her legal challenge proceeds. Chief Justice John Roberts stated that allowing her immediate removal would undermine the integrity of for-cause protection. This ruling is expected to reshape the balance of power between the presidency and regulatory bodies like the National Labor Relations Board and the Consumer Product Safety Commission, while preserving the Federal Reserve's independence for now.
