M2 Money Supply Signal

Signal Summary:

• Configuration statement (mandatory): Given the M2SL_YoY at 4.57% and M2SL_3Month_Change at 1.48% (1), this setup aligns with Upward-biased price paths and Normal volatility, where the dominant risk is Trend continuation, not Mean reversion.
• The signal reflects a transition into a Bullish regime, though current values suggest an internal discrepancy with the defined thresholds (1).
• Conviction Band: Medium, Interpretation Confidence: Mixed Signals, and Internal Conflict Flag: Yes. Signal Stability Assessment: Improving, Threshold Proximity: Near, and Revision Sensitivity: Unknown.

Methodology Applied:

• Bullish regime requires YoY growth > 6.0% AND 3M momentum > 1.0% (1).
• Worst-of logic: The signal is downgraded if either the YoY level or 3M momentum falls into a lower tier (1).
• Bearish regime is triggered if YoY < 2.0% or 3M momentum < -1.0% (1).
• M2 Money Supply Signal (Latest observation: 2026-03-01) (1).

Key Dynamics:

• The 3M momentum of 1.48% provides the primary bullish impulse by exceeding the 1.0% threshold (1).
• Internal Conflict: YoY growth at 4.57% remains below the 6.0% bullish requirement, implying a "Neutral" state under worst-of logic despite the table's label (1).
• Momentum has stabilized above the 1% threshold for five consecutive months (1).
• Conditional Invalidation: A drop in 3M momentum below -1.0% or YoY growth below 2.0% (1).

Scenario Balance:

• Base case dominant: Expansionary liquidity environment supports risk assets as 3M momentum holds positive gains (1).
• Upside risk: M2 YoY growth accelerates above 6.0%, removing internal conflict and confirming full bullish expansion (1).
• Downside risk: A sharp contraction in 3M momentum below -1.0% signals a liquidity withdrawal regime shift (1).

Time Horizon & Aggregation:

• Time Horizon: Cyclical (months) as M2 growth trends typically guide medium-term economic expansion (1).
• Aggregation Weight Hint: Medium due to the conflict between categorical labels and the underlying metric thresholds.

Macro Relevance:

• Informs the liquidity dimension of the macro environment (1).
• Economic mechanism: Measures supply of liquid assets available for spending; rising growth implies an inflationary and risk-on bias (1).
• Cycle position: Not determined.
• Interacts with Fed balance sheet trends and credit creation to assess broad monetary availability (1).

Regime Context:

• Regime is newly entered as a Bullish label following a transition from Neutral in early 2026 (1).
• Direction of change: Strengthening momentum within the liquidity supply component.

Model Limitations:

• M2 does not account for the velocity of money (1).
• Correlation with CPI varies significantly over different macro horizons (1).

Data & References:

• M2SL Series Data through 2026-03-01 (1).
• Data timeliness cannot be assessed.
• Public datasets for improvement: Fed Balance Sheet (H.4.1) and Consumer Price Index.