When we think of inflation we usually think of how much food, electricity or gasoline costs.
But there is another aspect as well: how much it costs us to buy financial assets.
The above chart at first glance may appear to be due to the strong performance of the 500 largest U.S. companies. But this is misleading: I believe it reflects more the effects of massive printing and inflation than how companies are doing.
The charts for the stock markets of countries with high inflation are similar: the more currency printing and inflation, the more the stock market rises.
That the S&P, which has an average return of about 10% on average has risen 30% in the last year is sobering. Let's think that in November 2020 we were already out of the stock market slump that was the COVID.
At the end of the day, anyone like me who has money invested in the S&P 500 can't be too happy about the 30% return because if we discount inflation it comes to almost nothing.
It's true that the more the money is printed more the money reaches into the market and higher the stock prices rally, but this thing is generally temporary in nature because if the money printing isn't backed by enough economic development eventually it will fall one day because companies that would have promised these valuations won't be able to justify their valuation using their profits/ Revenues and eventually the market would fall like a house of cards when people would ultimately take their money out of overvalued stocks.
It is very interesting about overvalued stocks, but there is something that worries me, or perhaps it is just a small intuition, whenever problems arise regarding falls in the global economy, who applies as fundamental is some variant of covid-19, I do not know if they do it on purpose or as a strategy, but it happens that it is always the perfect excuse for entertainment, in several countries the way to close their borders is being evaluated, obviously all economic problems are skewed towards these fundamentals.
