Global stock markets have recorded their best first-quarter performance in five years as investors throw their weight behind the artificial intelligence (AI) boom.
MSCI’s world index has risen almost 8pc since the start of the year, marking the strongest opening three months since 2019.
The performance was driven by strong gains for the US benchmark S&P 500, which has risen 11pc to record highs.
Investors have been piling into major US tech stocks in recent months amid a wave of enthusiasm for AI.
Shares in Nvidia, which manufactures computer chips required to underpin the new technology, have surged 88pc so far this year, pushing its market value to almost $2.3 trillion.
The tech rally has also been boosted by strong financial results for Silicon Valley giants such as Facebook owner Meta, which last month announced plans to return $50bn to shareholders after reporting record revenues and a steep rise in profits.
The optimism has spread to other industries, with General Electric, Walt Disney and pharmaceutical group Eli Lilly all enjoying gains of at least 35pc in the first quarter.
Alex Kuptsikevich, senior market analyst at FxPro, said the S&P’s growth could last “for months”.
He added: “This type of rally is seen in mature bull markets that have had enough of a push off the bottom but are not yet struggling to go higher.”
Growth in US stock markets has outstripped the UK, with the benchmark FTSE 100 lagging behind with growth of just 3pc in the year so far.
The London Stock Exchange has been battling to stem an exodus of companies defecting to New York in a bid to tap into a deeper pool of capital.
Building materials company CRH, betting giant Flutter Entertainment, packaging supplier Smurfit Kappa and travel group Tui are among the companies that have moved their main listing to the US in recent months.
However, there are signs UK stocks are starting to regain some ground. The FTSE 100 has risen 4.2pc in the last month, compared to a 3.1pc gain for the S&P 500.
Strong investor confidence comes despite signs of lingering inflation that have prompted markets to pare back hopes of rapid interest rate cuts by the Federal Reserve.
Figures published on Friday showed the personal consumption expenditures (PCE) inflation, the Fed’s favoured index, stood at 2.5pc in February, up 0.1 percentage points from a month earlier.
The reading, which was driven by higher fuel prices, was in line with forecasts. However, it remains above the central bank’s target of 2pc.
In an appearance at the San Francisco Fed on Friday, chairman Jerome Powell said the latest figures were “pretty much in line with our expectations”, adding: “We don’t need to be in a hurry to cut.”
Fed officials have signalled three interest rate cuts in 2024, with markets expecting the central bank to begin loosening monetary policy in June.
Michael Pearce at Oxford Economics said: “The loosening of labour market conditions, stable inflation expectations, and likely disinflation in rents to come all make us confident that inflation will still trend slightly lower over the course of this year.
“That should be enough to give the Fed confidence to begin removing some of the policy tightness later this year, though the resilience of the real economy means policymakers are in no rush.”
Dan Coatsworth, investment analyst at AJ Bell, said: “Investor sentiment has improved over the past six months thanks to growing expectations for central banks to cut interest rates.
“Investors have been happy to take greater risks, partly influenced by cash savings rates trending lower, which has driven more people to equities in search of better returns.
“This confidence has helped to drive up valuations but also raises the prospect that markets could find it harder to keep rising if inflation proves stickier than expected and we don’t get the Fed’s monetary policy pivot any time soon.”