The key driver underpinning this remarkable rally is liquidity. Major central banks have been aggressive in expanding their balance sheets for more than a decade through quantitative easing and injecting massive liquidity into the global financial system. Governments, too, have given out generous stimulus/relief monies to the people in response to the pandemic — resulting in trillions worth of excess savings worldwide.
Investing in global stocks is, undoubtedly, a winning strategy, particularly since the global financial crisis and against a backdrop of low and lower interest rates. The Covid-19 pandemic may have ended the longest US bull market in history, but stock prices rebounded very quickly and strongly. Notably, each correction has been relatively shallow and short — following which stock prices have inevitably gone on to record higher highs (see Chart).
