We got used to this… but it’s actually a staggering image!

For years now, we’ve seen many compelling analyses, usually based on valuation issues or macroeconomic risks, predicting an imminent crash and explaining why the bull market just could not continue for long. And for years they’ve all been dead wrong.

In 2016, the “smart money” was ultra-bearish. Around the same time John Mauldin was predicting an imminent 50% correction… For all the intellectual exertion that goes into such analyses, most market experts have missed the one force that has had the decisive impact on stock prices: central bank monetary inflation. This is not exactly a new thing, but a recurring pattern that’s been remarkably consistent for at least a century now as the following table shows:

The same principle was at work during and immediately after the roaring 20s. According to Murray Rothbard, “M” money supply was growing at an 8.1% annual clip from mid-1921 through 1928 fuelling a nearly 25% annual inflation of stock prices.

I elaborated this hypothesis in “The One Force moving stock prices and what it tells us about the future,” which I published in the wake of the 2020 market crash. Thus far the hypothesis has aged exceptionally well which then also seals the end-game. As I then wrote, we’ll see “an accelerating bull run accompanied by hyperinflation after which comes an epic crash.”

OK, not everyone’s convinced that we’ll have hyperinflation. But regardless of whether we’ll see hyper-, or only high inflation remains to be seen, the one thing we know for sure is that all bubbles ultimately burst, with no exceptions, so that’s a predictable outcome…

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