Forget about corporate reports, Federal Reserve meetings, and macroeconomic statistics. According to GMI founder Raoul Pal, all of this is nothing more than "noise" that merely distracts investors from the true driver of markets.
Pal claims that over the past 15 years, the correlation between the Nasdaq 100 index and global liquidity has been a staggering 97%. This means that virtually all movements in the stock market can be explained by the dynamics of the global money supply, rather than by company fundamentals or political decisions.
The analyst emphasizes that the real picture is shown by a chart comparing the Nasdaq 100 with global liquidity. When he first saw this alignment, he was amazed by its accuracy. This discovery forms the basis of a concept called the "Everything Code," which Pal has been developing at his analytical firm GMI since 2023.
Practical Takeaway for Investors
From this thesis comes a key practical takeaway: if the market moves in line with liquidity, then the most important skill for an investor becomes forecasting the dynamics of the money supply itself, rather than analyzing individual corporate or political news.
The community's reaction to Pal's statement was mixed. Analyst Michaël van de Poppe called the chart excellent and noted that Bitcoin, which temporarily broke the correlation, will sooner or later return to it and could quickly gain momentum. Other experts, such as Zack Humphries, wondered when liquidity would return to the cryptocurrency market and whether a major capital rotation should be expected.
However, some commentators were skeptical of the thesis. Critics questioned the methodology, asking whether Pal obtained a correlation coefficient of 0.97 without a time lag, and called the analysis "dubious." Others pointed out that the strong link between liquidity and the market has been known for a long time, and the main question is not the correlation itself, but the accuracy of forecasting the future dynamics of the global money supply, which determines the expected value of the index.
Expert opinion: Pal's theory is a powerful call to view markets through the lens of macroeconomic flows rather than microeconomic details. However, a 97% correlation is a statistical artifact that does not guarantee future results. The main challenge for an investor is not just to acknowledge this relationship, but to learn how to reliably forecast changes in global liquidity, which in itself is a task of the highest complexity.