U.S. Money Supply Is Doing Something No One Has Seen Since the Great Depression

[Earl]

U.S. Money Supply Is Doing Something No One Has Seen Since the Great Depression, and It Implies a Big Move to Come in Stocks By Sean Williams – Feb 4, 2024 at 5:06AM Key Points Meaningful declines in M2 money supply are rare. But the four previous instances (dating back to 1870) where M2 notably declined correlate with deflationary depressions. Money-based metrics suggest 2024 could be a challenging year for the U.S. economy and Wall Street's major stock indexes. However, history repeating itself has always been a blessing in disguise for long-term-minded investors.

M2 money supply is notably falling for the first time since 1933. Over the past four years, volatility has ruled the roost on Wall Street. The 127-year-old Dow Jones Industrial Average (^DJI 0.35%), benchmark S&P 500 (^GSPC 1.07%), and growth-powered Nasdaq Composite (^IXIC 1.74%) have traded off bear and bull markets in successive years since this decade began.
https://www.fool.com/investing/2024/02/04/money-supply-great-depression-big-move-in-stocks/

 

[Earl]

Most economists and investors rarely pay much attention to M2 given that money supply rises so consistently over long periods. Growing economies require more capital in circulation to facilitate transactions, which results in M2 increasing virtually every year.

But it's those rare instances where M2 does decline, and consumers are forced to forgo some of their purchases, that have resulted in trouble for the U.S. economy and Wall Street.



As of October 16, 2023, the yield for a ten-year U.S. government bond was 4.71 percent, while the yield for a two-year bond was 5.09 percent. This represents an inverted yield curve, whereby bonds of longer maturities provide a lower yield, reflecting investors' expectations for a decline in long-term interest rates.

Every recession that we’ve seen has been preceded by an inverted yield curve.

 

[Earl]

Nick Gerli
@nickgerli1

WARNING: the Money Supply is officially contracting. ��

This has only happened 4 previous times in last 150 years.

Each time a Depression with double-digit unemployment rates followed.