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Another vision of the markets

In these months, we have read a lot of analyzes on the sustainability of quotations achieved by major world equity indices and the times for the bubble burst, and not only.

We want to propose a different reading of the stock market focusing on the bmk SP500 index.

Let's start from the chart published by a business bank (annex Central Bank Balance Sheet) in which the monetary policy durations are compared with the growth of the SP500.

It is well known that the timing of interest rate and QE interventions for the Fed and the ECB are close enough.

The study suggests the beginning of restrictive actions from the first quarter next year.

Of course, we do not take the direct relationship between restrictive monetary policy and a collapse of markets, but we think it is interesting to propose this additional chart we have prepared (Margin debt attached).

As we know, the Margin Debt measures the money borrowed by investors, against collateral in securities, from brokers, investment banks and commercial banks to invest in the markets (of course we are talking about leverage).

The relationship between the variations of the SP500 and those of the Margin Debt is evident here and, as we know it, the effects of monetary policy on monetary circulation.

At this point, let us concentrate on next central bank maneuvers and monitor the change in the MD.





Giorgio Giovannoni