M2 Money Supply Signal

Signal Summary:

• Configuration statement (mandatory): Given M2SL_YoY at 4.29% and M2SL_3Month_Change at 0.82%, this setup aligns with Range-biased price paths and Normal volatility, where the dominant risk is Mean reversion, not Trend continuation (1).
• The signal is currently in a Neutral regime as both level and momentum components sit within baseline thresholds (1).
• Conviction Band: Medium, Interpretation Confidence: High Confidence, and Internal Conflict Flag: No. Signal Stability Assessment: Stable, Threshold Proximity: Near, and Revision Sensitivity: Unknown.

Methodology Applied:

• Regime classification uses fixed thresholds for M2SL_YoY (Bullish > 6.0%, Bearish < 2.0%) (1).
• Short-term momentum is governed by M2SL_3M_Change (Bullish > 1.0%, Bearish < -1.0%) (1).
• The Overall_Regime is determined by a "worst-of" risk-control aggregation of level and momentum states (1).
• Dataset: M2 Money Stock (M2SL), latest observation 2026-01-01 (1).

Key Dynamics:

• M2SL_YoY (4.29%) sits centrally in the 2.0%–6.0% Neutral range (1).
• 3-month momentum (0.82%) is currently stabilizing below the +1.0% acceleration threshold (1).
• There are no internal tensions as both metrics suggest a balanced liquidity environment (1).
• Conditional Invalidation: A 3-month momentum print exceeding 1.0% would trigger a Bullish regime shift (1).
• Stability is high, with four consecutive months of Neutral readings following the mid-2025 expansion (1).

Scenario Balance:

• Base case dominant; risks balanced.
• Upside risk: Liquidity acceleration if 3-month momentum breaks above 1.0% (1).
• Downside risk: Liquidity contraction if YoY growth falls below the 2.0% floor (1).

Time Horizon & Aggregation:

• Time Horizon: Cyclical (months); signal reflects medium-term liquidity trends (1).
• Aggregation Weight Hint: Medium; serves as a fundamental input for conditioning risk tilts in metals and cyclicals (1).

Macro Relevance:

• Informs the macro liquidity dimension by tracking the broad money supply (1).
• Economic mechanism: Neutrality implies stable capital availability, neither providing an impulse nor a headwind to risk assets (1).
• Cycle position: Not determined.
• Interacts with Federal Reserve policy signals and inflation composites to frame the "risk-on/off" environment (1).

Regime Context:

• The signal is in a persistent Neutral regime following a transition from Bullish in late 2025 (1).
• Direction of change: Stabilising within the neutral zone (1).

Model Limitations:

• M2 may lag real-time financial conditions; thresholds are baseline and may require overrides in extreme macro environments (1).
• Does not account for velocity of money or non-M2 liquidity components (1).

Data & References:

• Dataset: FRED M2SL (M2 Money Stock), Latest: 2026-01-01 (1).
• Most influential: M2SL_3Month_Change (0.82%) sitting near the Bullish threshold (1).
• Federal Reserve Liquidity Composite and M1 velocity data would improve depth.