M2 Money Supply Signal

Signal Summary:

• The M2 Money Supply signal currently indicates a Bullish liquidity regime as of 2025-11-01, driven by positive 3-month momentum. However, this state appears transient, with the signal projected to transition to Neutral in 2025-12-01.
• Conviction Band: Medium, Interpretation Confidence: High Confidence, Internal Conflict Flag: No.

Key Dynamics:

• The current Bullish classification for 2025-11-01 stems from the 3-month change in M2 Money Stock (M2SL) being 1.12%, which is just above the 1.0% acceleration threshold (1).
• The year-over-year growth rate stands at 3.44%, which is below the 6.0% high growth threshold (1).
• Momentum indicates weakening, as the 3-month change is projected to drop to 0.79% for 2025-12-01, causing a shift to a Neutral regime.
• Conditional Invalidation: A sustained drop in the 3-month M2 growth rate below 1.0% would invalidate the Bullish signal, moving it to Neutral or Bearish if further deceleration occurs (1).

Scenario Balance:

• Base Case dominant: Neutral liquidity conditions with moderating momentum are expected to prevail as the 3-month growth rate normalizes.
• Upside secondary: M2 3-month momentum re-accelerates above 1.0%, or year-over-year growth exceeds 6.0%.
• Downside residual: M2 year-over-year growth falls below 2.0%, or 3-month momentum drops below -1.0%, indicating significant liquidity contraction (1).

Time Horizon & Aggregation:

• Time Horizon: Cyclical (months), reflecting the medium-term impact of money supply trends on economic activity and asset markets.
• Aggregation Weight Hint: Medium, given M2 is a foundational liquidity indicator but its current Bullish signal is fragile and near a regime shift.

Macro Relevance:

• This signal primarily informs the Liquidity dimension of the macro environment.
• The transition from Bullish to Neutral suggests a shift from an expansive to a more stable or moderately contracting liquidity phase, potentially signaling a mid-to-late cycle liquidity environment.
• It typically interacts with other macro signals by influencing risk-on/off sentiment, particularly for metals and cyclical assets, and serves as an input to broader liquidity composites (1).

Data & References:

• M2 Money Stock (FRED: M2SL), latest observation 2025-11-01.
• The `M2SL_YoY` (3.44%) and `M2SL_3Month_Change` (1.12%) values were most influential for the current Bullish state.
• Additional public datasets that would improve depth or reliability include the velocity of M2 money stock and commercial bank credit growth.