Stock markets in multiple countries and regions around the world are experiencing a new wave of rising trends. Since the end of last year, the bull market driven by expectations of artificial intelligence growth has continued to rise with ample funds entering the market, overshadowing the risks of the U.S. implementing counterpart tariffs. In early August 2025, the overall performance of global stock markets improved, with multiple markets continuing their upward trend, especially in parts of the Middle East, Europe, and Asia.
Affected by U.S. tariff policies and other factors, many investors have withdrawn from the U.S. stock market and flocked to European stocks, which have continued to rise driven by the financial, industrial, and energy sectors. In the Japanese market, SoftBank Group, a representative AI stock, has continuously reached new highs. Stocks of semiconductor production equipment manufacturers Advantest and DISCO Corporation have also been favored by investors.
Except for Japan, major economies around the world have shifted to loose monetary policies. The rise in the U.S. stock market is primarily driven by tech giants themed around AI. For example, the performance of the 'Big Seven' tech companies—Apple, NVIDIA, Tesla, Google, Microsoft, Meta, and Amazon—has been outstanding, becoming the main driving force of the market. For instance, on August 8, 2025, Apple saw a single-day increase of 4%, and the tech sector in the S&P 500 index significantly outperformed other sectors. However, the actual economic situation in the U.S. is not as optimistic as the stock market performance suggests, and concerns about an economic recession have not been fully reflected in the stock market.
Global capital expenditures have entered a rapid growth phase, and the profitability of listed companies has improved. Since 2024, the explosive development of artificial intelligence has driven a rapid increase in capital expenditures for listed companies. Taking the U.S. stock market as an example, in the 2025 fiscal year, the capital expenditures of Microsoft, META, Google, and Amazon are expected to exceed $31.72 billion, an increase of about 49.6% compared to the 2024 fiscal year. The ROE (TTM) of the S&P 500 index has risen from 17.6% at the end of 2024 to 18.4% in August 2025, with profitability continuing to improve.
Major economies have begun to enter a rate-cutting cycle, with inflation pressures gradually easing and liquidity increasingly abundant. In 2025, the monetary policies of most regions around the world are entering a loosening cycle, with central banks in the U.S., Europe, the UK, China, South Korea, and India releasing liquidity through interest rate cuts, reserve requirement ratio cuts, or varying degrees of monetary easing measures.
Geopolitical conflicts and tariff risks continue to cool down, business investment confidence is recovering, and consumer confidence is improving, leading to upward revisions in economic growth expectations. With the U.S. reaching preliminary tariff agreements with the UK, Vietnam, Japan, the EU, South Korea, and others, and the extension of the tariff suspension period between China and the U.S., the international trade environment has somewhat recovered. On the data front, the global geopolitical risk and economic policy uncertainty index has shown a downward trend.
Citigroup stated that it expects the upward trend in global stock markets to continue until 2025, as declining interest rates and easing inflation will help support corporate profits. Citigroup predicts that the MSCI All Country World Index Local, which serves as a performance benchmark for global stock markets, will reach 1,140 points by the end of this year, suggesting a 10% upside compared to the closing price of 1,035.46 points on January 9. Citigroup expects global stock market earnings per share (EPS) to grow by 10%, slightly below the consensus expectation of 13% from analysts, and stated that the U.S. and emerging markets are likely to see the strongest EPS growth performance.
UBS strategists expect that the global stock market will continue to rebound in 2025, maintaining a year-end target of 910 points for the MSCI global index, implying an upside of about 9%. Strategists led by Andrew Garthwait wrote that tactical indicators are moderately optimistic, expecting AI to improve productivity, while credit spreads, ISM, and PMI all support equity risk premiums, even as bond yields rise. They forecast a 5% growth in MSCI global index earnings per share in 2025, 3% growth in the Euro Stoxx index EPS, and 16% growth in emerging markets.
Nevertheless, the market is not without concerns. The rekindling of inflation and economic slowdown may break the current optimistic expectations of the market. The U.S. counterpart tariff measures have officially taken effect, and although the stock market is currently calm, the global economy will inevitably be affected. Some market participants worry about the emergence of 'stagflation,' where inflation coexists with economic slowdown.
From a valuation perspective, the price-to-earnings (P/E) and price-to-book (P/B) ratios of the vast majority of markets are currently above the median levels since 2010, with many developed markets reaching significantly high positions above the 90th percentile. Measured by historical standards, the high valuations of the U.S. stock market may pose risks to investors. Over the past two years, the P/E ratio of the S&P 500 index has significantly increased, now standing at 21.7 times, far above the 17 times at the end of 2022.
In the short term, U.S. stocks may continue to be driven by earnings report season performance and policy expectations. However, in the medium to long term, weak economic data and uncertainty regarding policy adjustments may lead to market corrections. While investors enjoy profits from the stock market rise, they should also closely monitor changes in economic data, policy adjustments, and geopolitical factors to reasonably adjust their investment portfolios to cope with potential market risks.
