U.S. Money Supply vs. S&P 500 Trends
Since the U.S. monetary aggregates were recorded in 1959, the M2 money supply has never declined as much as it does today. As shown in the figure, the black line shows the trend of the S&P 500, while the red line is the ratio of M2 monetary total divided by GDP (forward 12 months). Every time this ratio spikes, the S&P 500 moves higher in tandem. Now, that ratio has fallen sharply, which may mean that the stock market is facing the same risk.
