US Stock Market vs M2 Money Supply Vs House Prices
Stock-Markets / Financial Markets 2024 Aug 13, 2024 - 05:16 PM GMTBy: Nadeem_Walayat
This graph shows the US stock market total market cap divided by M2 money supply as a measure of relative valuations which shows stocks in October 2022 were just as cheap as they were during the depths of the 2000 pandemic crash, remember October 2022? When most feared much lower prices and thus failed to buy when stocks were cheap, as is usually the case at every market bottom!
Also whilst stocks are nowhere at the bubble territory of the dot com bubble they are definitely not cheap hence why I am currently approx 70% invested in stocks after taking off the 10% invested in cyclical crypto's that I will probably completely disinvest from over the next 12 months.
However before you run off to sell all of your stocks bare in mind that as M2 increases stocks become cheaper, which is the over riding Inflation Mega-trend, governments print money, debase the currency which pushes the value of assets that are leveraged to money printing higher. Where M2 money supply currently stands, we are seeing an up tick in money printing which is good for a continuation of the bull market as stock prices trend higher whilst the above measure trends weakly higher towards the next greater bubble top that way back in June 2020 I penciled in for a top during 2026-27, which still remains the most probable outcome.
What this graph shows is that M2 topped March 2022 about 3 months after the stock market topped, bottomed October 2023, 1 year after stocks bottomed and has since been weakly trending higher which means US stocks have a wind behind their sails as the money supply expands as further illustrated by the annual percentage change in M2 that has now turned positive and is likely to trend higher into the range of +5% to +10%,
This is only one measure of money printing, another is US treasury debt issuance which is going ballistic this year not just because of the growing US debt mountain fed by an annual $1.7 trillion deficit but also some $9 trillion of debt is maturing that requires refinancing for which the US requires LIQUIDITY, EASY MONEY! Which translates into INFLATION, higher consumer and asset prices as that is the only thing the US and other governments can do because virtually every nation is inflating their own respective debt bubbles with maturing debt that needs to be constantly rolled over that requires liquidity hence we get asset price bubbles as we are set to witness in crypto's due to excess debt refinancing liquidity finding it's way into all asset markets.
Therefore asset prices across the spectrum will be significant higher a year from now as will be consumer prices due to the continuing debasement of currency and inflating the debt bubble and likely continue during 2026.
US House Prices vs M2
We got the 2006 bubble top followed by the bust and stagnation before the trend once more reverted towards following M2 higher, currently playing catchup to M2 with a wide gap left to fill which is supportive of rising US house prices,
This article is an excerpt from extensive analysis US Housing Market Analysis, House Prices Trend Forecast 2024 to 2026 that was first made available to patrons who support my work. So for immediate first access to ALL of my analysis and trend forecasts then do consider becoming a Patron by supporting my work for just $7 per month, lock it in now at $7 before next rises to $10 per month for new sign-ups. https://www.patreon.com/Nadeem_Walayat.
CONTENTS
Stock Market Trend Forecast
US Stock Market vs M2 Money Supply
AI Stocks Portfolio
Nvidia 10 for 1 Stock Split
AI Computers Hype
2024 - AI Equals Loss of Agency
Why Alien Intelligence Cannot Predict the Future
Consequences of AI
UBI - Universal Billionaire Income
GLOBAL WARMING Housing Market Consequences Right Now
RECESSION When Yield Curve Uninverts
Global Debt Bubble.
IMMIGRATION DRIVES HOUSE PRICES HIGHER
US Housing Market Free Equity
US FIXED MORTGAGES LIMITING SUPPLY
HOA Nightmare
Florida Hurricanes
Rentals Crisis
Who is Buying All the Houses?
Commercial Property Capitulation
US House Prices Momentum
US House Prices Trend Forecast
US Housing Market Stocks
UK General Election - 4th July 2024
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By Nadeem Walayat
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Nadeem Walayat has over 30 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series that can be downloaded for Free.
Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 1000 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk
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