The most obvious explanation is that investors around the world, who will eventually be the buyers of the S&P 500, are being suppressed by the monetary authorities in their home countries

The European Central Bank (ECB) is purchasing Italian and Spanish government bonds in their secondary markets The Bank of Japan is conducting an unprecedented money printing program The U S Federal Reserve is buying $85 billion in mortgage bonds each month The Bank of England is buying gilts The Bank of China is buying "blue chips" on the Shanghai exchange

The list goes on

The collective net purchases of these central banks is near $4 trillion annually

The net purchases of the central banks of the 30 countries in the MSCI All-Country World Index is $1 7 trillion annually

So, even though the S&P 500 is up $8 trillion since the bottom in March 2009, investors around the world have added $8 trillion to their equity positions since the bottom in March 2009

The central banks are responsible for a good portion of this increase

If you believe the markets are efficient, then investors around the world have decided that for whatever reason there is an excess of $8 trillion of liquidity in the world that has to be invested in U stocks

I see this as a problem

If the $8 trillion that has been poured into equities by investors around the world were to be suddenly withdrawn, the S&P 500 would plunge

The liquidity that the central banks are creating to support the Us equity markets is not being used to improve the economic well-being of the citizens of the respective home countries of the central banks

This is the opposite of how it was when the Us Federal Reserve was buying up U government bonds during the early 1930s Then, the Federal Reserve was using its own credit to prop up the Us economy Today, the central banks are using the credit of the respective home countries to prop up the Us