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The Market Is Speaking – But Are We Listening?
The chart above illustrates the close relationship between global money supply (Global M2) and the S&P 500 index. The more money that’s injected into the financial system, the more asset prices especially stocks surge. The white line (M2) and the yellow line (S&P 500) have moved almost in lockstep over the past decade.
As long as the money supply continues to expand, the stock bubble may not burst. But this monetary flow cannot grow forever.
Indeed, after the COVID-19 pandemic, central banks flooded the economy with liquidity to prevent collapse, leading to a rapid ballooning of the global financial balance sheet. As a result, M2 spiked and along with it, the stock market soared, despite fractures in the real economy.
However, history consistently reminds us that no stimulus lasts forever. When inflation rises, interest rates must go up, and cheap money retreats at that point, the market is forced to “breathe” on its own, without the artificial support of M2.
Lawrence G. McDonald, author of The Bear Traps Report, once emphasized:
"The markets are speaking loudly and clearly; we just need to have ears to listen."
This isn’t just trading advice it’s a profound warning about the global financial system. The market always sends signals before something happens the question is, do we have the ears to hear them? 0 reply
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