At a recent Reuters Investment management conference, presenters suggested the growth in Corporate earnings during the past year is in the double digits.

Credit Suisse reported an annual increase in global wealth of $17 trillion U.S. dollars, rising to an overall estimated total of $280 trillion.  This growth linked to increases in Corporate earnings.

This capital accumulation needs to be employed whether as venture capital, equity  or other investments.  That is, within the constraints of risk, as your capital increases you have a desire to employ it to get more capital.

Availability of Equity

On the flip side of growing capital are equity investments.  Although not a unique vehicle, investing directly in a companies stock via direct purchase, mutual funds or exchange traded funds (ETF), is a popular way to continue to grow your wealth.

At the aforementioned Reuters conference there was also some solid data presented indicating the supply of new equities was currently experiencing a net growth of zero.

Market Value Rises

And so, we arrive at a simple but logical explanation for the current explosion in the value of equity markets – world wide.   It is probable, one of the factors driving price gains is the ready availability of capital versus the flat supply of available equities to invest in.

Simply put demand exceeds supply.

The Predicted Market Correction

For months now many analysts have noted the precipitous heoghts equity markets have risen to, predicting a correction or a crash.  Historically the economic fundamentals do not support this so it is puzzling for some.

I believe the current state of prices is to some extent just a reflection of supply and demand and won’t change until either of those factors are altered, i.e., more equities available for sale or less capital accrued.  Both things are linked to overall economic activities.