The world is awash with cash. That's why asset prices keep rising

If most financial markets seem immune to bad news, there may be a simple reason: the world is awash with cash.

New Commonwealth Bank Economic research shows that global monetary liquidity remains abundant in 2026, creating a powerful tailwind for shares and other financial assets. 

The research, from CBA Fixed Income & Interest Rate Strategist Dr Hamid Yahyaei, introduces a new Global Monetary Liquidity index that combines data from 150 countries, tracking both private-sector lending and broad money balances, such as bank deposits. The result paints a clear picture: when money is plentiful, asset prices tend to rise. When liquidity dries up, markets struggle. 

“Liquidity is the lifeblood of financial markets and the degree to which it is abundant or scarce has important implications for asset prices,” Dr Yahyaei explains.

The research found major market turning points often coincide with dramatic shifts in liquidity. The collapse of Lehman Brothers in 2008, Europe's sovereign debt crisis, the Federal Reserve's quantitative tightening program and the COVID-19 pandemic all aligned with sharp changes in the global liquidity cycle. 

The relationship is especially pronounced in credit markets. As liquidity rises, corporate borrowing costs tend to fall and risk premiums compress. But when liquidity contracts, funding pressures increase and credit spreads can widen rapidly. Volatility measures such as the VIX and MOVE indices also tend to spike when liquidity deteriorates.  

Perhaps the most important finding for investors is what is happening right now.

Because official global data is released with a lag, CBA analysts also examined more timely measures of money supply across G10 economies. They found broad money growth is running at around 4% annually, ahead of estimated nominal global GDP growth of around 2-3%.  

Put simply: cash is growing faster than the economy.

And according to Dr Yahyaei’s research, that excess money has to go somewhere, and history suggests financial markets are often the beneficiary. According to the report, today's backdrop looks more supportive than restrictive for risk assets, reinforcing the market strength seen so far this year.  

"The global monetary liquidity environment is clearly abundant and supportive for asset prices," Dr Yahyaei concludes.

For investors worried the bull run is running out of steam, the global liquidity taps remain firmly open.