That case still needs to be made, here is Cullen Roche:
1) Are Central Banks “pushing money” on people?
The whole premise of the first paragraph is that Central Banks have implemented QE and forced money onto people which has resulted in a lot of asset chasing.¹ I’ve never understood this mentality to be honest. When the Fed engages in QE they expand their balance sheet and buy a bond from the private sector. In a low inflation environment bonds become increasingly similar to cash so these sellers of bonds are selling one cash-like instrument for another. As a result, the private sector ends up holding more low interest bearing cash-like instruments and the Fed holds higher interest bearing cash-like instruments. So the whole basis of this theory is that if someone who was already holding a risk averse asset then sells that risk averse asset for something very similar then they will suddenly become less risk averse and run out and drive up stocks? That doesn’t even make sense. If I have a moderate risk tolerance and hold a portfolio of 50% bonds and 50% stocks and I want to sell my bonds because I read a scary article about how bonds are super risky because interest rates are going to rise (more on this later) then I will swap out some part of my 50% bonds for cash or something else that’s relatively low risk (to maintain my moderate risk profile). I don’t swap out my whole bond position for a stock position or a role of the dice at the roulette wheel.
Anyhow, the evidence doesn’t even mesh with this. Global Central Banks have been implementing QE for 10 years now. The average annual return of the Vanguard Total World Index is 8.9% per year over that period. That is 0.02% higher than the average 35 year return. So, if investors are acting crazy today then they’ve been crazy for 35 years. Which might be true. It’s probably true. I actually think investors are usually kind of crazy. But they’re not any crazier today than they were 35 years ago.