We will leave it to the chartists to provide an appropriate name for the formation shown below (mutation unchallenged head and shoulders?) but one that is obvious is that global stocks as measured by the MSCI world index have never been higher, and the global central bank bubbe has now easily surpassed both the dot com bubble and the first housing/credit bubble.
But why the surge? We will leave that one to the economists, but we will observe that as BofA comments, “global equity 12-month forward EPS has turned negative on a YoY basis (-6.7%).”
In fact, as the chart below shows, global forward EPS is now plunging at the fastest rate since Lehman, and is down to levels last seen in 2011.
Incidentally, this shoudl not come as a surprise to those who recall our
article that in the most recent period, the “Global Dollar Economy
Suffers Biggest Plunge Since Lehman, Down $4 Trillion.” It only makes sense that as global GDP denominated in the reserve currency tumbles, it will drag global Earnings with it as well.
BofA also says what everyone knows, that “investor submission to central bank policies of financial repression is visible” but warns that “equity gains will likely be restrained unless EPS accelerates.”
It goes without saying, that EPS is not accelerating, and yet today global equities are soaring to fresh all time highs. All we can add here is “Good luck global central banks” as you try to figure out a way to unwind the biggest asset bubble in history without crushing everyone and everything in process.