U.S. Money Supply Is Making History on Both Ends -- Including a First Since the Great Depression -- and It Portends a Wild Ride for Stocks
M2 money supply has been rewriting history over the last three years.
For more than a century, no asset class has come remotely close to matching the average annual return of stocks. But this doesn't mean Wall Street's major stock indexes move from point A to point B in an orderly fashion.
For instance, investors witnessed historic volatility in the ageless Dow Jones Industrial Average (DJINDICES: ^DJI), broad-based S&P 500 (SNPINDEX: ^GSPC), and growth-propelled Nasdaq Composite (NASDAQINDEX: ^IXIC) during the month of April. Wall Street's benchmark S&P 500 endured its fifth-largest two-day percentage decline since 1950 and enjoyed its largest single-day nominal point gain since its inception -- all within one week.
When stock market volatility picks up in a meaningful way, it's not uncommon for investors to seek out data points and events that correlate with significant moves higher or lower in the Dow Jones, S&P 500, and Nasdaq Composite. Even though no such metric or event can guarantee the next directional move in stocks, there are some correlative metrics and events that have phenomenal track records of foreshadowing big moves in equities.
