Potential Shift Ahead as Market Money Supply Grows

Investors may face a market shift as accelerating money supply growth hints at future performance. Current trends indicate smaller companies could outperform mega-caps due to improved access to capital.

Date: 09-03-2025

AI Rating: 7

The report highlights a significant bull run in the S&P 500, marking a growth of over 66% from October 2022 to February 2023. However, not all stocks within this index shared equal performance during this period; only 27% outperformed the index in 2023. This led to a market concentration dominated by a few mega-cap stocks, but the report suggests this trend may not be sustainable long-term.

Money Supply Growth Insight
A crucial point raised in the report is the recent acceleration of U.S. M2 money supply growth, which recorded an increase of 3.86% year-over-year in January. This growth is indicative of a changing economic environment and suggests that smaller companies may increasingly access capital, leading them to invest more successfully in growth opportunities.

The correlation between increasing money supply and broader stock performance could signal a shift in market dynamics, where smaller companies begin to outperform larger counterparts as they become better positioned to raise capital more cheaply. Historically, such conditions have led to a more diverse and representative performance among S&P 500 constituents.

While the report does not provide specific data on earnings per share (EPS), revenue growth, or net income directly, the implications of increased market liquidity could positively impact profit margins in smaller companies as their ability to finance growth projects improves.

Overall, investor sentiment may benefit from this environment where smaller caps could take the lead, suggesting an attractive prospect for diversified investment strategies, especially as valuations of small and mid-cap stocks seem favorable compared to large caps.

Stocks: