$1T flowed into stocks in 2021, greater than last 20 years combined

[timoth3y]

I'm going to tilt at this windmill because it's important and illustrative of the incredibly poor quality of the financial news media.

No money "flows into" or "flows out of" the stock market or the bond market. Every security must be held by exactly one person until it is retired. (Let's set aside new issues, buybacks and mergers for now. They are a small percentage)

There is no money in the market at all. When you buy a share of stock, someone else is selling it to you. Your $100 becomes their $100.

The effect of recent monetary policy is that we now have a huge amount of zero-interest money sloshing around the economy. So your counter-party needs to do something their new $100. Putting it in zero-interest T-bill is not appealing, so maybe by another stock? Maybe real-estate? Crypto?

So we ave all this new money flowing though the system pushing up all asset prices.

It's also a big driver of the startup boom. Because not only do startups potential provide good returns, but they actually use the money to create jobs and build things.

[jganetsk]

There is something called fund flow: https://www.investopedia.com/terms/f/fund-flow.asp

If a company issues $1000 of new stock, then that's an inflow of $1000 into the company. And if it buys back $1000 of stock, that's an outflow.

This kind of analysis is commonly applied to ETFs, for example, because ETFs will manage their outstanding shares by the issuance/redemption of creation units. https://www.investopedia.com/terms/c/creationunit.asp

You can certainly apply this analysis in aggregate, and you can also compute the net flow. I don't know if that's what the article posted here is doing.

Also, people talk about monetary policy as driving this, and that's wrong. Fiscal policy drives this (we've had a lot of new government debt issued in the last few years). Even though it's orthodox economics to attribute this to monetary policy, it's flat out wrong. Monetary policy does not impact net assets of the private sector. It's neutral in that regard. Fiscal policy definitely impacts net assets of the private sector. If you want to learn more, you can read "Where Do Profits Come From?" https://www.levyforecast.com/assets/Profits.pdf

[marstall]

> When you buy a share of stock, someone else is selling it to you.

if that's not money flowing into a market, what is?

[mox1]

This kind of ignores IPO's, SPACs and secondary (or whatever they are called) offerings.

All of those things introduce "new" stock into the market.

[lamontcg]

> There is no money in the market at all. When you buy a share of stock, someone else is selling it to you. Your $100 becomes their $100.

for someone to have $100 to buy a share of stock they have to send that $100 to their broker first

[SantalBlush]

It's not a given that a startup is a net job creator--not even close. Amazon, for example, put a lot of retailers and their staff out of work. If the startup is "disrupting" an existing market, it's going to destroy some jobs in the process. That's not to say the disruption can't bring good things with it, but the "create jobs" pitch is pretty much overused by everyone, everywhere.

[masteruvpuppetz]

You're forgetting that a lot of the new investors are probably playing with options. You are right the the stock with 10 Million value can only be bought for 10 Million but options can be bought infinitely.

There has been a huge rise in #FinTwit groups on discord or other social media. Last weekend there was a group asking for 100$ per month subscript where they would tell you on discord voice chat what option to buy and which to sell. They are not the only ones.

[oliv__]

I get that someone is buying someone else's stock but your comment seems to ignore the basic fact that even though there might be a limited amount of stock to buy or sell, there is an unlimited amount of potential transactions, which could result in an increase or decrease of the flow of money in and out of the market.

Also, as another commenter mentioned you omit IPOS, SPACS etc...

[amin]

Central banks have been buying up treasury bonds, thereby lowering the yield. They are basically saying

"Hey rich people with cash, if you want to get a return on your money, you have to stop investing in risk-free government bonds, and start investing in businesses in the real economy"

The Fed has basically 'pushed' investors out of bonds, and into equities and real estate. This partly explains the absurdly higgh gains we saw recently in those asset classes. But now that inflation is getting out of hand, the Fed might reverse someday it to slow down the economy and keep inflation low.

[errantmind]

How much money is flowing into any businesses that matter? I don't imagine shoving more money into the S&P is having that much of an effect on 'the economy'

[guilhas]

Inflation bubbles over the horizon

Almost a fifth of ALL US dollars were created this year https://www.cityam.com/almost-a-fifth-of-all-us-dollars-were...

[wobblyasp]

> Many economists are skeptical. Andrew Hunter, senior US economist at Capital Economics, said the relationship between the money supply and inflation has “in reality” been “pretty weak or arguably non-existent for a few decades now”.

> “We had these same concerns back in 2008/9, that it was going to trigger a surge in inflation. Clearly that didn’t happen.”

[imtringued]

Can you buy stocks with central bank reserves? I get that QE drives yields down on treasury bonds and this makes them less attractive but are you sure this isn't about regular people selling their bonds and getting stocks instead?

[mlac]

I'm not sure on the numbers here but would be interested if others' on the site have input.

I'd be interested to know how much the stock increase will come from younger investors putting their inherited wealth into more aggressive mutual funds. If the majority of people with wealth followed the idea to go more conservative as they aged, then it would make sense that as those people died and passed on their wealth it would be invested more aggressively.

This would naturally happen over time, but COVID would speed it up.

[rsj_hn]

stock market is an exchange, so for every dollar flowing "into" stocks, there is a dollar flowing out. For every buyer, there is a seller.

In which case, what possible usefullness can one obtain from counting buyers but ignoring sellers?

[ssivark]

That ignores the case of feedback loops where the person who got money out of the market then turns around and re-invests at the increased price (iterating several times). Your double-entry accounting is technically correct, but that metric easily misses any “mania” where people’s expectations are highly asymmetric, and they make repeated speculative bets on that basis.

[nkmnz]

Some sellers create the supply according to the demand, most notably via IPOs, but also when emitting new stock.

[Ekaros]

What happens to that money flowing out? Is it spend or does it again flow to some other stock?

[errantmind]

Because if you buy a stock for $1 and sell it for $100 then $99 has 'flowed' into the market while your $99 profit is sitting in a brokerage account

[pphysch]

I wonder how much is retail vs institutional investors

[crenwick]

> Stragetists at JPMorgan also recently commented on the rush into stocks, noting that the flows have been driven by retail investors.

[endisneigh]

How does this end?

[iknowSFR]

If you’re asking how does it stop, as someone else mentioned: when the government decides to stop participating in the market.

If you’re asking what happens when this falls apart, my guess is in hyper-consolidation of wealth. That can mean the decreased wealth of the super-rich but with the far greater decrease of wealth of everyone else.