From Wall Street to Asia, stocks surge as risk appetite broadens

• Major indices hit records: Dow and S&P 500 at all-time highs, German DAX broke 25,000, FTSE 100 above 10,000, and Asian markets (Nikkei, Kospi, Shanghai, Hang Seng, Nifty 50) near peaks
• The VIX volatility index has drifted to 12-month lows despite markets at all-time highs, indicating investors see minimal need for downside protection
• Fed has cut rates to lowest levels in three years with more cuts expected, while 'bad news is good news' mentality persists where weak data boosts rate cut expectations and strong data signals economic strength

Market Summary: Global Equity Rally Continues into 2026

Key Market Performance

Global equity markets opened 2026 with strong momentum, reaching multiple all-time highs across regions. The Dow Jones Industrial Average and S&P 500 hit fresh records in early January, while the NASDAQ and Russell 2000 remain near their peaks from October and December, respectively. European markets showed renewed strength, with Germany's DAX surging above 25,000 for the first time and the UK's FTSE 100 breaking above 10,000.

Geographic Breadth

The rally has broadened significantly across Asia-Pacific markets, with Japan's Nikkei, South Korea's Kospi, Shanghai Composite, Hong Kong Hang Seng, and India's Nifty 50 all trading at or near record levels. This global participation represents a notable shift from previous tech-concentrated gains.

Market Dynamics

Investors are rotating profits from large-cap tech and multinational stocks into previously undervalued market segments, creating healthier market breadth and potentially reducing concentration risk. The VIX volatility index has declined steadily from its April peak, indicating minimal investor concern despite elevated valuations.

Supporting Factors

The Federal Reserve recently cut interest rates to three-year lows with guidance for additional cuts in 2026. Inflation appears to be peaking, already reaching the Fed's 2% target in the Eurozone. Unemployment remains historically low, though Non-Farm Payroll data (updating January 9th) has been volatile.

Risk Assessment

Market sentiment exhibits a "bad news is good news" mentality, where weak economic data fuels rate cut expectations while strong data signals economic resilience. However, the analyst warns that extreme one-sided positioning and subdued volatility may precede unexpected market disruptions.