Portfolio Performance, Elections, Fed Moves, and Patience

November 3, 2024 - Update

Macro: Money Supply, Financial Conditions, and Market Impact

The availability of credit for businesses is crucial; without it, economic slowdowns or recessions can occur. The stock market often senses these downturns in advance, sometimes leading to a crash. That’s why I closely monitor the money supply in the economy, represented by M2, which the Federal Reserve manages.

Money Supply Trends

The chart below shows M2 money supply changes over the last two years. It highlights the large Fed injections following COVID and the subsequent reduction that began in mid-2021. This downward trend stopped in April 2024, and since then, money supply has grown at a steady rate.

Financial Conditions

I also track financial conditions via the Chicago Fed. Since late 2022—around six months after the Fed’s shift in M2 policy—conditions have been steadily improving. In addi…