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Comment by kbutler | Hacker News Reader

I wondered about this too, but both sides of the ratio are denominated in current dollars, so dollar valuation is already divided out:

  ratio of total US stock market value to US GDP

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Maybe inflation is not hitting these at the same pace?

The money supply has been increasing for already some time, but only now we are seeing inflation catching up for example on consumer prices.

For money supply to show in consumer/business side of GDP, money created by central bank need to be distributed. When interest rates have been low, maybe banks were hesitant to start pushing money to individuals and businesses and it instead ended up in stock market.

There's just one more step; the market's value is an expectation of the future while the GDP is a 'now' metric. So while inflation is auto-adjusted (roughly) in the past, a strong expectation of inflation now can send the market cap up (and either GDP will catch up, be it natural or on inflated dollar terms) or the market will crash, or some combination of the two to bring the indicator back to earth.

I don't think that's correct. Stocks suffer with inflation. Interest rates rise and money moves to bonds. Credit is costlier and profits fall. Both weigh on stock prices.

Historically stocks perform poorly in times of high inflation.

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