L’argent, le moteur des marchés
Monetary tremors
06 février 2026 par Simon Ward
A January post noted the possibility that global six-month real narrow money momentum had crossed below industrial output growth in December, suggesting less favourable monetary conditions for markets. Recent dramatic sell-offs in some speculative assets could reflect such a shift.
The suggestion is still tentative: additional – but not yet complete – December data indicate that the two series converged rather than intersected – see chart 1.
Chart 1
Will a cross-over be confirmed soon? Monetary prospects are uncertain but stronger January manufacturing PMI results suggest a rise in six-month industrial output momentum in early 2026.
In data since 1970, global equities outperformed US dollar cash significantly on average in months following a positive reading of the gap between real money and output momentum (by 12.0% annualised). (The calculation allows for reporting lags.)
By contrast, negative gaps were associated with average underperformance in the following month (of 5.5%).
Needless to say, these averages conceal frequent “misses” in both directions.
The six-month real money / output momentum gap was positive in most months in 2025. It was, however, negative in 2023 and much of 2024, when equities rallied strongly.
As previously discussed, the six-month gap was a misleading guide to “excess” money over this period because of a large monetary overhang from the money growth surge in 2020-21.
A simple way of illustrating this overhang is to compare five-year growth rates of real money and industrial output. Real money growth was still much higher in 2023 – chart 2.
Chart 2
The five-year gap turned negative last year. It last closed in the early stages of the GFC bear market.
Back then, the six-month gap had been negative for more than a year. The closing of the five-year gap was followed by an acceleration of the market decline.
With the five-year gap already negative, a negative shift in the six-month gap could be reflected in more immediate market weakness than in 2007-08.
