US M2 Money Supply Hits Record High, Is Bull Run Cycle Ready?
Financial markets have been on a tear in recent days, with the S&P 500 hitting a record high of 5,735 and gold rising to $2,690 an ounce. So far, 2024 has been the best year for gold in the 21st century.
An important factor contributing to the recent good growth of investment markets comes from the simultaneous implementation of monetary easing policies by many countries. These policies have contributed to adding liquidity to the global economy.
As of September 25, the combined balance sheets of the worldâs top 15 central banks exceeded $31 trillion, the highest since April this year. This figure has recovered well since July, reflecting the stimulus packages launched by many countries to cope with the uncertain economic environment.
In the United States, the Federal Reserve (FED) made a strong interest rate cut of 50 basis points (bps) on September 19. The Dot Plot chart also shows that the FED may cut interest rates by another 0.5% by the end of the year. In August alone, the US M2 money supply increased by nearly 1% - currently at 21.1 trillion USD. This is also the highest level of M2 money supply since the end of 2022, when the global market was "sinking in red".
The M2 money supply includes cash in circulation, savings, time deposits, and mutual funds. The steady increase in the M2 money supply over the past months has played a key role in the strong rebound in investment markets.
Historically, there has been a strong correlation between the S&P 500 and the M2 money supply. For example, when the Covid-19 pandemic broke out in 2020, the M2 supply bottomed out at $15.2 trillion in February, just before the S&P 500 hit a low of around 2,409 in March.
