The NASDAQ index is reportedly 97.5% correlated with total global liquidity, emphasizing the significant influence of central bank monetary policies over traditional company performance metrics. This correlation suggests that the index's movements are more reflective of the amount of money being printed by central banks rather than the earnings or quality of the companies listed. The remaining variance is attributed to the NASDAQ's own adoption curve.
This perspective challenges traditional valuation measures, which may no longer accurately reflect a company's success but rather indicate the extent of currency debasement. This insight forms the basis of the "Everything Code" framework, which posits that understanding liquidity as the primary driver of asset prices can demystify market behaviors, making them more predictable.
NASDAQ's Correlation with Global Liquidity Highlights Central Bank Influence
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