Stocks Work Higher Even As Economic Expectations Decline

This chart from the website Zero Hedge shows how equity prices worldwide have moved higher since 2012 even as economic expectations via world GDP have declined.  The post from which this is taken quotes a Financial Times article that seems to pin at least some of this advance on the world's central banks investing in equities.  Here's the main point:

"The {Financial Times} reports "a cluster of central banking investors has become major players on world equity markets." The report, to be published this week by the Official Monetary and Financial Institutions Forum (OMFIF), confirms $29.1tn in market investments, held by 400 public sector institutions in 162 countries, which 'could potentially contribute to overheated asset prices." China’s State Administration of Foreign Exchange has become “the world’s largest public sector holder of equities”, according to officials, and we suspect the Fed is close behind (courtesy of more levered positions at Citadel), as the world's banks try to diversify themselves and "counters the monopoly power of the dollar." 

I think this perhaps explains some of the rise over the last two years in stocks.  I'm not sure it explains the entire picture as we don't know how accurate the article is, how much central banks have actually invested in equities or when they started doing so.  I do know that stocks a few years ago were cheap irrespective of what ultimately happened to world GDP expectations and perhaps somebody else saw this opportunity back then.

The bigger take-away that I see from this chart is that stocks have less room for error at current economic levels than they did a year or so ago.

Link:  Clusters of Central Banks Have Secretly Invested $29 Trillion in the Market.