Gauge of global stock-market performance logs first record close in 2 years

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A widely followed gauge of developed-market stocks logged its first record close in more than two years on Wednesday.

The MSCI World Index
which includes shares from 23 developed-market countries, was up 0.6% on Wednesday to finish at 3,265.07. It marked the highest close since Jan. 4, 2022, according to Dow Jones Market Data.

While called a “world” equity gauge, its name belies an important reality driving its performance: it is heavily weighted toward the U.S. According to a fact sheet published at the end of January by MSCI, the index’s weighting to U.S. stocks stood at 70.1%.

To help put that in context, the next-biggest country represented in the index is Japan, at 6.2%.

Like the U.S., Japanese stocks have also fared well over the past year. The Nikkei 225
the main Japanese benchmark, is up 7.9% year-to-date in local currency terms. This comes after the index rose more than 28% in 2023, making it one of the few international equity indexes to outperform the S&P 500 in local-currency terms.

The index’s strong advance following years of underperformance has sparked speculation that the the Japanese gauge could soon take out its record high from December 1989, when it closed at 38,195, according to FactSet data.

A quick glance at the world index’s biggest components reads almost exactly like the S&P 500, which is trading on the cusp of its own milestone Wednesday, just a few points shy of topping 5,000 for the first time ever.

According to the fact sheet, Apple Inc.
is the world index’s top holding, with a 4.7% weighting, followed by Microsoft Corp.
Nvidia Corp.
+2.75%, Inc.
and Meta Platforms Inc.
Every stock among the index’s top 10 constituents is a U.S. megacap company. These companies have contributed heavily toward the S&P 500’s year-to-date gain, as well as its 2023 rebound.

Indeed, the global equity benchmark owes much of its recent success to the U.S., especially these megacap technology names, said Jason Hsu, chief investment officer at Rayliant Global Advisors.

“What’s driving the world index is the U.S., and what’s driving the U.S. is really the ‘Magnificent Seven’,” Hsu said during an interview with MarketWatch.

Since the start of 2024, the world index is up 2.4%, compared with a 4.6% gain for the S&P 500, and a 4.8% climb for the Nasdaq Composite
which is also heavily weighted toward U.S. megacap stocks.

The developed-market gauge rose by nearly 22% in 2023, its best calendar-year performance since 2019, FactSet data show.

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