MFOHome About Commentary Discussions Funds The Best Resources Support Us!

Howdy, Stranger!

It looks like you're new here. If you want to get involved, click one of these buttons!

Sign In Register

Categories

In this Discussion

Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.

    Support MFO

  • Donate through PayPal

The Relationship of M2 and Stocks

beebee
in Other Investing
I wanted to share this recent (Nov 2023) article regarding M2 money supply and its recent contraction:
The significance of this decline is twofold. To start with, there are economic implications of having less capital in circulation. With core inflation still well above historic norms due to higher shelter expenses, consumers may be forced to pare back their discretionary purchases. In other words, declining M2 sets the stage for a potential downturn in the U.S. economy.
money-supply-great-depression-big-move-in-stocks

Another article (Feb 2021) discusses M2 and its inconsistent implications on stocks:
...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 dropoffs 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.
understanding_m2_and_stocks

Comments

  • WABACWABAC
    Who will feel the greater pinch first? Employed consumers, or debt-riddled zombie companies?

    I keep seeing headlines that the Fed is out to get the zombies.
Sign In or Register to comment.