Hi folks!
I just tried to take a broader perspective on things again, and wanted to take a look at the
pricing of the S&P500 relative to the M2 Money Supply, as well as the effect of real interest rates on markets.
Note that the orange line here is the negative of the real interest rates - that is, .
My takes are these:
(1) The S&P500 relative to the M2 (broad -i.e. including credit) money supply is at a critical level given historical data - only once have this level of resistance broken (during the dotcom bubble).
(2) The real interest rate have NEVER been this negative - with current rates even beating those of the 70´s and 80´s.
(3) (Not shown in chart) The treasury have been falling constantly since the 80´s, and have nowhere to go to the downside ATM.
(4) The critical support of the S&P500/M2SL lies approximately at the break-even for real interest rates if we compare their development from the 60.
I strongly believe that the real interest will move towards zero eventually - either the Fed and the governments manage to curb inflation rather quickly through credit regulations, taxes and interest rate hikes,
or the markets will just ignore it in the end and dump their bonds (no one will hold bonds at a certain loss of 5.6% or more in annual terms - that is madness!).
When this occurs, the stock market will take a huge dump - even compared to the M2 money supply (which will most likely decrease in the time to come!).
DYOR.
NFA.
I wish you all well!
I just tried to take a broader perspective on things again, and wanted to take a look at the
pricing of the S&P500 relative to the M2 Money Supply, as well as the effect of real interest rates on markets.
Note that the orange line here is the negative of the real interest rates - that is, .
My takes are these:
(1) The S&P500 relative to the M2 (broad -i.e. including credit) money supply is at a critical level given historical data - only once have this level of resistance broken (during the dotcom bubble).
(2) The real interest rate have NEVER been this negative - with current rates even beating those of the 70´s and 80´s.
(3) (Not shown in chart) The treasury have been falling constantly since the 80´s, and have nowhere to go to the downside ATM.
(4) The critical support of the S&P500/M2SL lies approximately at the break-even for real interest rates if we compare their development from the 60.
I strongly believe that the real interest will move towards zero eventually - either the Fed and the governments manage to curb inflation rather quickly through credit regulations, taxes and interest rate hikes,
or the markets will just ignore it in the end and dump their bonds (no one will hold bonds at a certain loss of 5.6% or more in annual terms - that is madness!).
When this occurs, the stock market will take a huge dump - even compared to the M2 money supply (which will most likely decrease in the time to come!).
DYOR.
NFA.
I wish you all well!
