Long-term promise vs current running of economy (III)
Central banking, (commercial banks) money supply, stock market, inflation
On Tue we wrote that
* 10+ trillion in money supply, in money market accounts being actively drawn
* Money market accounts earning 5+% interest rate
* emergency of AI
From past weekend AMZN become top causal predictor for US equities. AMZN runs online retail, also largest cloud services which could host infrastructure of many client computing services. Let's search for what are computed to drive AMZN, as of Tue 26 Mar (https://tsterm.com/?q=amzn&h=24w&asof=2024-03-26):
1. NVDA (industrial/semiconductor, AI)
2. Basic materials XLB
3. Nasdaq 100 QQQ
4. Nike NKE (consumer)
5. ASML (industrial/semiconductor, only firm that produces semiconductor manufacturing equipment)
The above five's today's prices are computed to be most influential for AMZN's price in 6 months.
Every 10 years, the M2 money supply doubles; over past 10 years, Basic Materials XLB about doubled as well.
Now given AMZN, with a (high) price-to-earning ratio 61 and market capitalisation 1.85 trillion USD, can it absorb excess liquidity on the market and contribute towards repressing inflation? Not necessarily. For example let us search for Marriott, the international hotel chain. Its predictors are computed to be
1. Amazon AMZN (consumer, cloud services, technology)
2. Lockheed Martin LMT. (industrial/defence)
3. United Kingdom Equity EWU
So here is our fourth point:
* inflation of some discretionary item (outside statistical basket for inflation index)