FAST FIVE: Collapse In Money Supply Is Still A Major Risk For The Market

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It was only the latest week that drove the month to be positive.

Figure: 8 YoY M2 Change with CPI and Fed Funds Historical Perspective The charts below are designed to put the current trends into a historical perspective.

Mr Wenzel proposed that large drops in Money Supply could be a sign of stock market pullbacks.

His theory, derived from Murray Rothbard, states that when the market experiences a shrinking growth rate of Money Supply (or even negative) it can create liquidity issues in the stock market, leading to a sell-off.

They are raising rates and crashing the money supply, but they have not come close to undoing all the damage done in 2020 and 2021 (much less the last decade).

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