In 2019 and 2020, our regard for time-tested valuation tools resulted in tactical portfolios being underexposed to stocks during a pair of tremendous rallies. Now, the critique is that we don’t appreciate the brilliance of today’s policymakers and their miraculous ability to pivot just when the stocks (and, in the latest case, the economy) need it most.
This year’s upswing in money-supply growth has been one of many factors that’s prevented our economic work from triggering a recession warning. Following a two-year decline, year-over-year growth in M2 bottomed near 3% late in 2018 and has trended upward all year, reaching 6.7% in the latest week (Chart 1).
Among six major monetary gauges, five are now graded bullish, compared with just three a few months ago, and zero at the end of 2018.
We always do our own work and draw our own conclusions. Lately, though, we’ve wondered what the late “Monetary Marty” Zweig might say about the stock market’s current liquidity backdrop.
While the celebration over Jerome Powell’s “Christmas Capitulation” lingered throughout February, we’re still awaiting signs the capitulation consisted of anything more than words.