COTW: Central Banks No Longer Supporting Markets

October 30, 2018

The chart below can be downloaded here

 

We have long contended that asset purchases by central banks contributed – directly or indirectly – to gains in global stock markets (represented here by the MSCI All Country World Index). We know that correlation does not necessarily imply causation, but a visual inspection of this chart, which has been updated through October 29, suggests at least some link between balance sheets and markets. Intuitively, the notion that central banks electronically creating money out of thin air and then using that money to buy assets may have an impact on the price of said assets doesn't seem like too much of a stretch to us.

 

The recent dramatic reversal in global stocks corresponds with a dramatic reversal in monetary policy support by three key central banks. In this case, we believe correlation does imply some degree of causation.

 

 

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SpringTide Partners, LLC is a Registered Investment Advisor with the state of Illinois and other states jurisdictions where required. Registration with the SEC or any state securities authority does not imply a certain level of skill or training. All information contained herein is for informational purposes only and does not constitute a solicitation or offer to sell securities or investment advisory services. All investing carries risk including risk of principal loss. All statements made on this website are opinions of SpringTide Partners, LLC and are subject to change. SpringTide Partners, LLC assumes no responsibility for the accuracy of the data included. Statements made on website shall not constitute investment advice.

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