Markets globally have been going one way the last 18 months. There are a few blips though. However, the straight-line direction is “on the rise”.
We all know why markets are rising, but this has been in our subconscious mind.
Imagine a situation. There is a shopping complex, and all those who enter the complex are given $1000 (without any consideration) each to buy articles of their choice. As everyone has money to spend, they buy goods from shops in the shopping complex. They are rarely concerned about the prices being charged by shop owners. Everyone is willing to pay more because they received $1000 for free. Prices are soaring, yet demand is high.
Now relate it to what’s happening in the stock markets globally. Central banks of all significant economies are flushing printed money to fund their fiscal deficit. The money flowed to residents of these economies, and they now have colossal money power. They are buying and investing in real estate, alternate assets and direct/indirect equities. We see a massive surge in valuations across all markets globally. People are willing to pay almost double of every dollar earnings today when compared with the price 18 months ago. Money supply is leading to excessive valuation multiples, and we all are continuing to buy.
Inflation across major economies is on the rise. Be it the US, UK, Middle East countries, China, India and Latin America…all are witnessing a surge in inflation to unprecedented levels. Central banks will have little option but to raise interest rates. Once this happens, it will pull the rug from under the stock markets, and we will see a massive blood-bath to remind us of the crisis of unprecedented levels soon.