With accelerated money printing in the wake of the pandemic, stocks are set to rise faster than ever before. Most people know about the massive amounts of money the Federal Reserve has injected into the financial market in recent years. But few people understand how big it has really gotten: $11.2 Trillion since December 2019. And more every single day!
Printing endless amounts of money decreases the value of the dollar and causes inflation.
The consumer price index (CPI) has gone up more than 200% since 1990. so, let’s compare how different assets appreciated in value over the same period of time:
Gold – up 400%
Bonds – up 570%
Stocks – up 2,039% in the same time frame.
In fact, over the last 200-plus years, stocks beat every other investment, even during times of runaway inflation. That makes stocks the preferred way to protect yourself and grow your money when the government pumps trillions of dollars into the economy.
With the accelerated money printing in the wake of COVID-19, stocks are going to rise faster than they ever have before. This market phenomenon is called stockflation. But the FED printed more money in the last 12 months than it has in the last 200 years. This paves the way to “The Great Stockflation.”
And it does not stop here. According to Morgan Stanley the money printing won’t peak before the end of 2022, when the balance sheet hits almost $30 trillion. At the same time, the government has basically erased alternatives to stocks, like savings accounts, CDs and bonds.
Investors are pouring money into stocks, which just fuels the stockflation more.
Thanks to the Fed, stimulus packages from Congress and a wave of new investors, the stock market should rally in the years ahead.
Sven Franssen