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Strategies & Market Trends : The Art of Investing
PICK 46.61-1.0%Oct 30 4:00 PM EDT
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From: Sun Tzu10/28/2025 4:55:32 PM
2 Recommendations

Recommended By
rdkflorida2
sixty2nds

   of 10466
 
Cash on sideline theory, formulated properly

S&P 500 Index to M2 Money Supply Ratio (1984–2024)

Key Observations

  1. Dot-Com Bubble Peak (1999): The ratio reached its highest point in this 40-year period in 1999 at 1.680, coinciding with the peak of the dot-com bubble. This indicates an extreme overvaluation of the stock market relative to the underlying money supply at that time.

  2. Post-Bubble Crash and 2008 Crisis Lows:

    • The ratio dropped significantly after 1999 as the tech bubble burst.

    • It reached its lowest point of 0.389 in 1984 at the start of the period, but the lowest point after 1999 was 0.584 in 2008 during the Global Financial Crisis, as the stock market crashed while M2 saw rapid expansion.

  3. Current High Valuation (2024): The ratio has shown a strong upward trend in the last decade, and the reading of 1.373 as of May 2024 is the second highest in this 40-year historical series, only surpassed by the 1999 peak. This suggests a very high valuation of the stock market relative to M2.

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