Global M2 money supply measures the total amount of money in circulation worldwide, including cash, deposits, and money market funds. From $40T in 2008 to over $127T today, its growth rate is the single most important macro variable for predicting asset price cycles.
2010–2026 | Fed + ECB + BoJ + PBoC + rest of world
The growth rate (not level) is the primary driver of asset prices
M2 is a broad measure of money supply that includes physical cash, checking deposits, savings deposits, and money market funds. It represents the total "dry powder" available in the financial system. When M2 grows faster than GDP, the excess money inflates asset prices.
Quantitative Easing (QE) is when central banks create new money to buy government bonds. This directly expands the balance sheet and indirectly grows M2, as the money flows from bond sellers into the broader economy. The 2020 QE injection of $8T caused M2 to grow 17.2% in a single year — the largest annual expansion since WWII.
Quantitative Tightening (QT) is the reverse: central banks let bonds mature without reinvestment, reducing the balance sheet. This contracts M2 and tightens financial conditions. The 2022 QT cycle saw global M2 contract for the first time in a decade — directly causing the simultaneous crash in stocks, bonds, crypto and gold.
M2 growth above ~5% YoY historically correlates with above-target inflation. The 2021 surge to +13.6% created the worst inflation in 40 years. Current growth of ~4% is in the "Goldilocks" range — enough to support asset prices without reigniting inflation pressure that would force central banks to tighten again.