As today's chart shows, since the global financial crisis, stock markets have been very strongly correlated with the global money supply growth. It therefore seems that the strong growth of global stock markets has been and currently is driven by massive monetary stimulus, respectively quantitative easing or asset purchases. And it is also quite possible that this strong relationship will continue to apply in the coming period.
We can see from the chart that a year ago, as the first wave of the pandemic escalated, global stock markets fell very sharply. However, key central banks have ranked much faster in terms of quantitative easing, and the global money supply has begun to grow even faster than in the past. And it was this fact that fundamentally helped global stock markets recover last year.
My short-term outlook for global stock markets is slightly negative, however the still unprecedented quantitative easing of key central banks and global money supply growth is a key risk to this outlook.
Investment Strategist at Conseq Investment Management, a.s.