Why did the sentiment indicators peak in the 1st Quarter? Now we know.
A few weeks ago, I asked the question what happened in the first quarter to turn all the growth metrics down (original post link in comments section). Now we know the answer, thanks to Barry Bannister at Stifel.
Global money supply growth peaked and began to move down. Ignore for a minute the inflation headlines. Global money supply changes directly affect markets and indirectly affect real economies. So the headline inflation we see in our data is strongly affected by pandemic supply disruptions and indirectly affected by changes in money supply.
You can see a coincidental peak in growth sentiment and money supply growth in the 1st quarter. Btw, money supply growth is only going to decline over the next year if the Fed reduces QE and raises interest rates (gulp!). You can guess what may happen.
Robert Lloyd, CFA®
Chief Investment Officer
Lloyds Intrepid Wealth Management
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