Global stocks soared to their best quarter in over eight years in Q1 as an increasingly dovish Federal Reserve buoyed equity markets.

The STOXX Global 1800 index rose 1.3% in March, taking its total return to 12.3% last quarter, the best performance since Q3 2010, while the S&P 500 finished 13.7% higher over the same period, the second-best Q1 for the index in the last 30 years.

The Fed’s U-turn on policy has been the key macro driver of these returns. After markets corrected in Q4 last year, the central bank cut its forecast for rate rises having previously signalled just two hikes last December.

This culminated in March when Federal Open Market Committee (FOMC) officials unanimously voted to remain “patient”, agreeing to indefinitely stick with current rate levels.

Fed chair Jerome Powell said the otherwise strong domestic picture had been impacted by slow growth in China and Europe.

“Now we see a situation where the European economy has slowed substantially and so has the Chinese economy, although the European economy more,” Powell said.

“Just as strong global growth was a tail wind, weaker global growth can be a headwind to our economy.”

Other major central banks have followed the Fed’s lead. The European Central Bank cut its eurozone growth forecast for this year from 1.7% to 1.1% in March, with ECB President Mario Draghi warning the outlook for the next year had deteriorated.

The ECB governing council responded by announcing another programme to stimulate bank lending in the eurozone with Draghi adding interest rates would “remain at their present levels at least through the end of 2019”, having previously said they would remain at these levels through to the end of the summer.

These factors have boosted the performance of equities, however the Treasury yield curve inverted last quarter as 10-year Treasuries fell below 3-month bills in March, a historical signal a recession could be on the horizon.

Whether the strong Q1 equity performance can continue throughout the rest of this year remains to be seen, with macro factors still lurking in the background such as the ongoing tension between Italy and the EU.

Chinese equities dominated the best performing ETFs of the quarter with the Xtrackers CSI300 Swap UCITS ETF (XCHA) and the Lyxor Hwabao WP MSCI China A DR UCITS ETF (CNAL) returning 35.3% and 29.8% in Q1.