Momentum leads price, which leads fundamentals (macro).
As the above chart shows, macro indicators are extremely lagging ones.
In the 1930s which were huge deflationary years, it took more or less a decade from a significant increase in the rate of change of the monetary base to trigger rampant inflation (exacerbated by WWII of course). As fiscal deficits exploded, yield curve controls became necessary to avoid excess in savings.
It has now taken a bit more than a decade to see a jump in the rate of inflation since the rate of change in monetary base as a % of GDP increased significantly back in 2008 (exacerbated by COVID supply chain issues).
Once again, huge fiscal deficits and yield curve controls are expected this decade (with other financial repression taxes).
Are you still wondering why the stock market is going up while macro indicators are turning red?
Source: Lyn Alden
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