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M2 and the Stock Market

Coming back to the current period in the top chart, it is clear enough that big surges in M2 are followed by big surges in the stock market. It is less clear whether or not big drop offs in M2/GDP lead exactly to stock market declines, but they do seem to at least bring periods of increased volatility. So that is what we can look forward to if the Fed ever decides that it will try to put the M2 genie back into the bottle.

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