By Graham Summers, MBA | Chief Market Strategist
I keep warning that “this time really is different” when it comes to the economy.
Everyone knows this on some level… but most analysts are refusing to acknowledge it.
Remember, never before has the U.S. shut down its economy voluntarily. Not during WWII, not during the Spanish flu, NEVER. So that alone was a game-changer as far as how our economy functions (and is measured).
Moreover, never before has the Fed and the Federal Government pumped $11 TRILLION into the financial system in the span of 20 months. Consider that the U.S. economy was ~$20 trillion at the time… so we’re talking about policymakers putting an amount greater that 50% of GDP into the financial system.
Again, this has never happened before. In fact, if you add up all the money ever printed in the history of the U.S., over 40% of it was printed in 2020 alone.
So again, it is “different” this time. Both the downturn, and the policy response were unprecedented. And that has rendered many traditional economic metrics useless at predicting the next move in the cycle.
We’ve already assessed the yield curve inversion, as well as the coming Sahm Rule trigger which we expect later this summer. Today’s lets assess the Money Supply or M2.
In its simplest rendering, M2 measures the amount of money in the financial system (savings accounts, money market funds, etc.) Historically, analysts have looked at M2 to assess whether a recession was coming or not. If M2 goes negative, it usually precedes a recession.
I bring all of this up because in 2023, M2 went negative, resulting in countless analysts and commentators shouting that a recession was about to hit.
The big problem with this is that they forgot to note that M2 had GROWN by 40% during the pandemic… so of course it’s going to decline a bit! Heck even a significant decline is likely to occur after a 40% jump!
Today, M2 is turning back up again. And all the folks who were screaming about its decline indicating a recession was about to hit are silent. And all the investors who sold the farm based on the gurus/ analysts screaming about M2 have missed out on one of the greatest bull runs in stock market history.
Again… it really is different this time. Most historical economic measures are so warped by the pandemic and subsequent policy-response that obsessing over them is only going to lead to missing out on market gains.
After all, as investors, our job is to make money, not look for any excuse to dump stocks and panic about something bad happening. And as I’ve outlined in recent articles, this means riding bull markets for as long as possible, and then side-stepping bear markets when they eventually hit.
In the very simplest of terms, you need to be invested in stocks, until an objective, verifiable tool (not your feelings or limiting beliefs) tells you it’s time to “get out.”
I’ve developed a tool that takes ALL of the guessing work out of this problem. With just one look at this tool, you can tell whether it’s a good time to buy stocks or not. I detail it, along with what it’s currently saying about the market today in a Special Investment Report How to Predict a Crash.
To pick up a free copy, swing by
Best Regards
Graham Summers, MBA
Chief Market Strategist
Phoenix Capital Research
