How much did “extra” liquidity matter for the rally in equities from the October lows? And how far does the liquidity explanation go towards explaining the ongoing resilience of stocks in the face of an ostensibly onerous rates backdrop?

Those questions continue to be topical amid a vexingly sturdy stock market which, notwithstanding February’s stumble, appears mostly unconcerned or, if that’s not quite the right adjective, we can say “inattentive.”

If you ask JPMorgan, simply looking at global M2 isn’t sufficient. That measures gross money supply, not “excess” money. To estimate the latter, you need to know something about demand.

Fortunately, the bank’s Nikolaos Panigirtzoglou has a model for that. His framework looks at money demand as a function a “transaction motive” (demand as it relates to nominal incomes or GDP), a “portfolio motive” (demand as it relates to cash as a competing asset class) and a “precautionary motive” (demand as it relates to uncertainty).

Without delving into the specifics (which you don’t need), the figures above tell the story, particularly the right-most line chart.

JPMorgan’s model which, again, “estimates money demand as a function of the three motives” mentioned above, “suggests that the gap between actual money supply (global M2) and the model-driven medium-term money demand target remains very large,” as Panigirtzoglou put it.

The implication is straightforward. “This model suggests that excess cash balances or liquidity relative to what money demand drivers would justify remains considerable, which has likely contributed to the resilience of risky assets in the face of significant tightening in policy rates,” Panigirtzoglou said, on the way to cautioning that “as the pace of liquidity withdrawal picks up with the ECB joining the Fed and BoE in running down its bond holdings, and as more than €700 billion of TLTROs outstanding mature this year, there could be some pressure on excess cash balances.”