You see it all the time: Booming times for Wall Street banks and investors, while life for ordinary Americans remains ordinary. At least they have piles of new national debt to own.
Michael Hartnett said the reasons for it come to three "Ps": policy, positioning and profits.
Policy: The provision of central bank liquidity has been massive ($6 trillion of central bank buying of assets in the past seven years).
Positioning: With little demand for money in a deleveraging economy, liquidity has waded into financial markets, reducing risk-premia and boosting under-owned assets such as equities.
Profits: Corporate austerity since the Great Recessionhas induced record corporate profits ($1.6 trillion) and record levels of corporate cash ($1.2 trillion), an asset-positive, growth-negative combo.
One big number helps make the situation clear: While the U.S. economy has grown by $1.3 trillion since the March 2009 lows, stock market wealth has swelled by $12 trillion.
| 