I have been anticipating the continued climb of the local stock market. See here, here and here. Yesterday, the JSE All Share Index hit new record highs, closing at 34,958.59 points.

The rally has been driven by those sectors that respond first to money printing: industrials, property, and financials. I have written before that the Reserve Bank accelerated money growth from mid-2011 to March 2012.

The Industrials Index is now nearly 50% above pre-crisis highs, and is up 21% since the money printing accelerated in mid-2011.

The listed Property Index is up 29% since the money printing accelerated in mid-2011, and the same amount above pre-crisis highs.

The Financials Index climbed above pre-crisis highs again yesterday. Up 25% since the money printing accelerated in mid-2011.

The performance of these sectors are an indication that the Reserve Bank is fueling another business cycle boom, led by a boom in the capital goods sectors. When the Reserve Bank slows money growth, these will be the sectors that indicate first that the bust phase is unfolding.

Money growth has slowed in recent months, but this has not been enough to alter the trend of equity values of these sectors. If the slow money growth persists in coming months, the stock market may be setting up for a major crash.

If money growth chugs along, the next phase of this mini-boom will result in money capital and real capital shifting from the capital goods sectors (charts above) to the consumer sectors, and coupled with sharply rising food prices at present, will result in strong price inflation in 2013 and 2014.