S&P 500 compared to M1
What is the relationship between M1 and the S&P 500? Although time lags exist, the relationship between M1 and the S&P 500 is very tight. So tight, that the correlation is .92. Although Austrian and Monetary economic theory stats that general prices are determined by the growth in money supply, to see a correlation of this magnitude is truly astounding. The period under study is from 1969 to 2014:
What is the relationship between M1 and the S&P 500? Although time lags exist, the relationship between M1 and the S&P 500 is very tight. So tight, that the correlation is .92. Although Austrian and Monetary economic theory stats that general prices are determined by the growth in money supply, to see a correlation of this magnitude is truly astounding. The period under study is from 1969 to 2014:
| Summary | |
|---|---|
| Average Ratio | 1.3 |
| Correlation | 0.92 |
| Min | 0.56 |
| Max | 2.92 |
| Current Ratio | 1.49 |
| Current Percentile | 69% |
The Average Ratio is the difference between the S&P 500 divided M1. Correlation measures the fit between the S&P 500 and M1. The Current Percentile stats where were are today as compared to history. For example, the 69% suggests that the S&P 500 is over valued, but not to extremes.
A detailed review of this study will be shared in subsequent posts.
Conclusion
Equity prices as measured by the S&P 500 to M1 can move much higher.
No comments:
Post a Comment