Sunday, 1 October 2017

The Unsustainability Of The Stock Market Boom

The ratio between the market cap of equities and Gross Private Saving for the U.S. hit a new high in Q2 based on data going back to early 1950s. The chart below depicts the extreme tops in the ratio set in 2000/01 and 2007/08, and now also 2017.

As of Q2 2017

As high equity prices reflect monetary inflation and with it a source of financial instability, and as increased saving helps achieve the opposite, it should be especially worrying that this ratio will move even higher in Q3 this year since stocks have rallied further.

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