Chart shows year-over-year money flow into equities

 

You may notice a slight change recently.

One of two things needs to happen: either inflation needs to drop dramatically or the stock market needs to drop significantly, or some combination of the two—at least from a historical perspective. 

Depending on how you measure standard deviation, we are somewhere between 4–5 standard deviations from the mean. 

Again, dramatically higher than the Roaring 20s (well more than double) or the tech bubble (more than 50% higher).

The question of the day, and it is truly a question that I don’t have an answer to, is what will Jerome Powell do if the stock market falls 20% and inflation is still at 4%? And they haven’t even begun to raise interest rates? 

Does he follow the Fed’s mandate and lean into inflation, calling up his inner Volcker, or does he look to his unwritten mandate of giving the stock market what it wants?

Next year is truly unknown territory. 

John Mauldin 3 December 2021

https://www.mauldineconomics.com/frontlinethoughts/capital-excess

Volcker startade sedelpressarna, inte Greenspan.

https://englundmacro.blogspot.com/2014/04/volcker-startade-sedelpressarna-inte.html