Global Debt Drives Stocks

Global debt rose to a record $237 trillion in the 4th quarter of 2017, according to the Institute of International Finance (IIF).  Debt increased more than $70 trillion from a decade ago.  As debt grew, so did Gross Domestic Product (GDP), which grew faster.  Gross Domestic Product (GDP) is the value of all goods and services produced in a time period.  According to the IIF, debt now stands at around 317.8% of GDP.  As global debt rose to records, so did US equity markets.  This demonstrates our view that stock market growth is fueled by debt and credit.  The use of credit impacts the money supply.  It expands as credit is extended and debt is accumulated.  This flows into assets which increases prices, including stocks.

Source: Institute of International Finance