At the beginning of 2024, the context in which financial markets would operate was expected to be one of disinflation, accompanied by a soft landing of the US economy and stabilisation of growth in Europe. Consequently, a progressive cycle of interest rate cuts was expected. However, the reality turned out to be different. The first part of the year was marked by a pause in the disinflationary process and a tense labour market. Thus, the central banks of advanced countries adopted a more cautious stance and investors had to lower their expectations of rate cuts for the year, going from anticipating six cuts, that is, a total cut of 150 basis points, to only two of 25 each. This adjustment in monetary policy expectations resulted in an increase in long-term debt yields in the US and the euro zone, rising by 40 and 60 basis points respectively since the beginning of the year. Despite higher interest rates, most risk assets were not affected, with volatility on the stock market remaining low during the first half of the year, with equity indices reaching new highs and speculative corporate bond spreads narrow. Risk premiums in peripheral and emerging markets remained contained, rising recently due to political risks and possible insufficiently controlled fiscal deficits. Several factors explain this good market performance. First, there is still ample liquidity, derived from the injections made in response to the pandemic. Second, economies have managed to avoid recession, with relatively resilient consumption supporting corporate profits and margins. In addition, household and corporate debt levels remain under control. On the other hand, companies took advantage of the low interest rate environment to refinance and extend the terms of their debt, so they have been less affected by recent increases. Finally, the market is counting on the Federal Reserve to join the ECB and begin to reduce interest rates this year, which gives some support to valuations. Regarding equities, investor strategies have sought refuge from the impact of high interest rates in large companies with financial muscle and a history of growth, such as stocks linked to artificial intelligence. The latter has caused the most significant rise in the stock market to be concentrated in a few stocks that also accumulate high valuations. Thus, on average, the current price of the seven magnificent technology companies means paying between 34 and 40 times the 12-month earnings. Cristina Varela, from BBVA Research. Follow all the information on Economy and Business on Facebook and Twitter. Xor in our weekly newsletter