M2 Money Supply Correlation To The NASDAQ In 2000 vs 2025 Signals Market Top

Key Concepts

• M2 Money Supply: A measure of the U.S. money supply that includes M1 (currency in circulation, demand deposits, traveler's checks, and other checkable deposits) plus savings deposits, small-denomination time deposits, and retail money market mutual fund shares.
• NASDAQ: A global electronic market for trading securities, particularly technology stocks.
• Market Top: The peak price level of a market or security before a significant decline.
• Correlation: A statistical measure that describes the extent to which two variables change together.
• Multiple: A factor by which one number is multiplied to get another.
• Dot-com Bubble: A rapid rise in U.S. stock prices, particularly in technology stocks, fueled by speculative investment in internet-based companies, followed by a sharp decline in the early 2000s.
• Artificial Intelligence (AI): A field of computer science focused on creating systems that can perform tasks that typically require human intelligence.
• Basis Points: A unit of measure used in finance to describe the percentage change in a financial instrument. One basis point is equal to 0.01% or 1/100th of a percent.

M2 Money Supply and NASDAQ Market Tops

The video explores the potential correlation between the M2 money supply and major highs in the NASDAQ index, specifically investigating if changes in M2 can predict market tops.

Historical Data and Calculation:

• March 2000 (Dot-com Top):
  • M2 Money Supply: $4.85 trillion
  • NASDAQ Top: 5,125
• Current Data (as of the video's recording):
  • M2 Money Supply: $22.5 trillion
  • NASDAQ High: 23,788

Key Calculation and Observation:

1. M2 Multiple Calculation: The increase in M2 money supply from March 2000 ($4.85 trillion) to the current level ($22.5 trillion) represents a multiple of approximately 4.65 ( $22.5 trillion / $4.85 trillion ≈ 4.65).
2. NASDAQ Correlation: The video then applies this same multiple (4.65) to the NASDAQ's dot-com era high.
   • Calculation: 5,125 (dot-com top) * 4.65 = 23,775.
3. Astounding Result: This calculated value of 23,775 is remarkably close to the NASDAQ's recent high of 23,788, with a difference of only 13 points.
4. Market Pullback: Following this near-perfect correlation, the NASDAQ has reportedly pulled back to 23,711, falling below the calculated "M2-dictated" top.

Argument Presented:

The presenter, Gareth Soloway, argues that this precise correlation suggests a potential predictive power of the M2 money supply in identifying market tops. He posits that if the M2 money supply, when multiplied by the historical growth multiple, aligns with the current NASDAQ price, it could indicate that the market is at or near a peak.

Underlying Drivers and Analogies

The video draws a parallel between the driving forces behind the dot-com bubble and the current market environment:

• Dot-com Era: The primary driver was the nascent and rapidly expanding internet, which was seen as a world-changing technology.
• Current Era: The analogous driving force is Artificial Intelligence (AI), with its widespread impact on data centers, chip manufacturing, and various industries, also expected to transform the world.

This comparison suggests that similar speculative fervor and technological disruption, coupled with significant increases in money supply, could lead to comparable market dynamics.

Factors Influencing Market Direction

While the M2 correlation is presented as a significant indicator, the presenter acknowledges other crucial factors that will influence the market's future direction:

• Earnings Reports: The upcoming earnings season will be critical in determining the fundamental health of companies.
• Federal Reserve Policy: The Federal Reserve's decision on interest rates (a potential 25 basis point cut is mentioned for Wednesday) will significantly impact market liquidity and investor sentiment.
• Geopolitical Events: The outcome of the meeting between President Trump and President Xi on Thursday is also noted as a potential market mover.

Conclusion and Call to Action

Gareth Soloway concludes that based on the chart and data analysis, there is a strong possibility that the market is currently at a top. He emphasizes that this observation is based on his extensive chart studies and is presented for viewers' consideration. He encourages viewers to share the video if they find it intriguing, promising to continue bringing such analyses.

Notable Statement:

"And technically speaking, the M2 today at 22.5 trillion would give us this number. What was today's high in the NASDAQ? 23,788. Basically, just 13 points higher." - Gareth Soloway