Quantitative Support in the US

5 февр.

1. Liquidity and Investments:
An increase in M2 typically means there is more liquidity in the economy, as consumers and businesses have more cash or cash-equivalents at their disposal. This excess liquidity can lead to increased investment in stocks, including those in the S&P 500, driving up stock prices.

2. Economic Expectations:
A growing money supply can signal that central banks (like the Federal Reserve in the United States) are implementing looser monetary policies, often in response to concerns about economic growth. Lower interest rates and other forms of monetary stimulus can encourage borrowing and investing, leading investors to buy stocks in anticipation of economic recovery or growth, which can push up stock market indices like the SPX.

3. Inflation Expectations:
Over the long term, increases in the money supply can lead to inflationary expectations. If investors believe that inflation will rise, they might choose to invest in assets like stocks, which are seen as a hedge against inflation, because companies can raise prices to maintain their revenues and profits in nominal terms. This shift can drive up stock prices, including those in the S&P 500.

4. Risk Appetite:
An expanding money supply can also affect investor sentiment and risk appetite. With more money available and potentially lower returns from traditional safe investments (like savings accounts or bonds, which might offer lower interest rates when the money supply is growing), investors may turn to the stock market in search of higher returns, driving up equity prices.

S&P can go higher, this depends on the FED
Golilocks continues.
The economy is not going to crash, why?
It's already happened. We had a GFC.
Go to university and do any relevant classes to macroeconomics. You will at some point discuss, or study the GFC. This is so we does not happen again.
Of-course nothing is going to go terrible during a US election year.

Now this does not stop black swan events...