Valuation – S&P 500 Market Capitalization to GDP vs. S&P 500 Market Capitalization to M2 This chart puts market valuations into perspective, as the massive collapse in the velocity of money has led the Fed to print money. Image: Nordea and Macrobond
U.S. Real M2 Growth and Inflation The United States is exposed to the risk of higher inflation, as the fiscal and monetary policies are the most expansionary. Image: Morgan Stanley Research
S&P 500 Market Cap/M2 Money Supply The S&P 500 market capitalization relative to M2 money supply suggests more upside. Image: Morgan Stanley Research
U.S. Money Supply M2 and Reserves of the Banking System U.S. money supply M2 shows significant jumps in growth, which could affect future inflation. Image: Financial Times
M2 Money Supply and S&P 500 vs. Japan M2 and Topix M2 is rising significantly in the U.S., as during the Japanese bubble market of the 1980s. Image: Gavekal, Macrobond
Federal Reserve Money Supply M2 Leads Global Manufacturing PMI Chart suggesting that the Federal Reserve money supply M2 leads global manufacturing PMI by 18 months. Image: Nordea and Macrobond
Cash Allocation by Non-Bank Investors Globally Non‑bank global investors are rotating out of stocks and bonds and into cash as the Middle East conflict‑related energy shock raises inflation fears and the risk of higher interest rates. Image: J.P. Morgan
Total Debt vs. U.S. GDP vs. Monetary Velocity The rise in debt has coincided with a collapse in M2 velocity. Image: Real Investment Advice
Correction – S&P 500 and Marshallian K With U.S. GDP growing faster than M2 money supply, the S&P 500 is vulnerable to a correction. Image: Bloomberg
U.S. Core Inflation Expected Over the Next 21 Months (Leading Indicator) M2 velocity year-over-year tends to lead U.S. core CPI by 21 months (R² = 0.52 since 1996). It has been quite accurate for more than 20 years. Click the Image to Enlarge
U.S. Excess Liquidity Growth Leads S&P 500 Returns This chart suggests that M2 money supply to nominal GDP ratio leads S&P 500 returns by one year. Is the S&P 500 vulnerable to a drop, followed by a recovery? Image: Oxford Economics, Macrobond