Chief Economist’s note: Where do we go next?

This week had a fairly simple narrative – buy before the others will. Joe Biden checks will start arriving at US households this weekend and this means more than $200 billion of spare cash, of which a good portion is supposed to find its way to stocks. So if those households will be buyers next week or next month, why not do a tiny frontrunning?

With this in mind rising bond yields suddenly have slipped into the shadow not to mention valuations that no longer seem to bother the investment public. Meanwhile, as Morgan Stanley calculated, market cap of global stocks is now equal to nearly 82% of global GDP and that’s nearly 20% above a dot-com bubble peak which for a long time looked as an outlier that would not be repeated.

Relation of MSCI World to global GDP. Source: twitter.

The reality is so much out of sync from anything that we’ve seen so far that making firm conclusions on historical data and relationships is dangerous. But so is assuming that this time it will be different. For reference, Nikkei225 remains well below its all-time high from… 1989.