Working Money vs Stock Market

2022年8月30日

M2 is the money in circulation issued by the government.
(fred.stlouisfed.org/series/M2SL)

M2REAL is the real value of M2 deflated by the CPIAUCSL (Consumer Price Index for All Urban Consumers).
(fred.stlouisfed.org/series/M2REAL/)
(fred.stlouisfed.org/series/CPIAUCSL)

M2REAL is in an infinite uptrend, with a downward correction now.
The correlation with SPX is positive as both are falling.
A change in correlation, either up or down, could indicate a move in SPX.

Scenarios:

1. M2REAL falling, SPX falling: positive correlation
2. M2REAL rising, SPX rising: positive correlation
3. M2REAL falling, SPX rising: negative correlation
4. M2REAL rising, SPX falling: negative correlation

With money more scarce and expensive due to inflation, I believe more in scenario 1.
After this inflationary crisis is over, maybe scenarios 2 and 4.

2022年8月30日

註釋

Dividing SPX by M2REAL, waiting to see if it breaks the low of the week.