Money money money
|S2N spotlight
The latest M2—US Money Supply reached a record $21.9 trillion in May. The growth year-on-year was 4.5%, sitting well above targeted inflation of 2%.
Treasury Secretary Scott Bessent said they are looking to replace Fed Chairman Jerome Powell in a few weeks. What does that mean if Powell’s term still has another year to run?
President Trump has stated he wants interest rates at 1%. Against this backdrop, how can one expect to see inflation tamed anytime soon? Especially if there is follow-through on the tariffs and you get a dovish Fed Chair.
If you used the 200-day moving average of the year-on-year M2 growth rate as a trading signal, you would outperform the S&P 500 on a risk-adjusted basis while significantly underperforming on a total return. In today’s world of headlines (noise), I am sure that would not appeal to most investors. The current signal remains bullish.
I am not going into the winners and losers of excessive money growth, other than the obvious loser. The once mighty dollar has lost 41% over the last 45 years. I have been reluctant to make a strong call on dollar weakness, favouring bullish gold. I will do some further analysis on the dollar, but I think we are on the cusp of a significant move down in the dollar.
S2N observations
Just sharing a bunch of price journeys for 2025. You can see all of these and much more on the research portal.
A lot of food-related futures are well off their early highs in the year. This no doubt blurs the vision of future inflation.
Apple and Tesla labels are overlapping in the chart below.
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The EURUSD is on an 8-day up streak, the 10th longest in its history.
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The calendar I have been accessing over the last 2 years has suddenly been hidden behind a paywall. I created this version on the fly while writing this letter, and I can see it is wrong, as those events were on Friday. I will address it ASAP.
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