US M2 Money Supply (YoY % Change)
Year-over-year percentage change in US M2 money supply from 2001 onwards. The growth-rate view of M2: spots inflection points faster than the level view and is the standard form used by macro researchers and central-bank commentary. The 2020-2021 spike to over 26 percent year-over-year was the highest M2 growth rate on record. The April 2023 trough at minus 4.4 percent was the deepest M2 contraction since 1949. AUD-trader framing inline.
Chart
US M2 money supply year-over-year percentage change, derived from FRED M2SL. Above zero = M2 expanding; below zero = M2 contracting. The 7% reference line marks the rough threshold above which risk-asset returns have historically been strong.
What does M2 YoY measure?
The year-over-year percentage change in M2 captures how fast the total US money stock is expanding (or contracting) in proportional terms. The level of M2 grows almost monotonically over decades; the rate of growth oscillates between roughly 0 percent and 10 percent in normal times, with extremes during crises.
The YoY transformation strips out the long-run growth trend and surfaces the cycle. Inflection points in M2 YoY (turning from rising to falling, or vice versa) line up reliably with inflection points in Fed policy expectations and, with a lag, in risk-asset performance.
M2 growth regimes since 2000
| Period | M2 YoY range | Backdrop | Risk-asset outcome |
|---|---|---|---|
| 2000-2007 | 5-9% YoY | Normal expansion, low rates after 2001 | Housing boom, GFC building |
| Late 2008-2009 | +10% spike | QE1, GFC emergency response | Equity bottom March 2009, multi-year bull starts |
| 2010-2019 | 4-7% YoY | QE2 / QE3, ZIRP, gradual normalisation | Long equity bull, BTC 2013/2017/2020 cycles |
| 2020 Q2-Q4 | +25% to +27% | COVID fiscal + monetary surge | Risk-on; BTC AUD 4x to 2020 year-end |
| 2021 | +11% to +13% | Tapering, transitory inflation narrative | BTC AUD cycle top November 2021 |
| 2022-2023 | +1% peak to -4.4% | Fastest hiking cycle ever | BTC bear, equity bear, USD strength |
| 2024-2026 | +2% to +5% | Hold then cut cycle | Cycle 2024-2026, gradual liquidity rebuild |
Trader takeaway
M2 YoY is a regime variable, not a trade-timing signal. Useful rules of thumb tested against historical Australian-resident outcomes:
- M2 YoY above 7 percent + rising. Maximum risk-on regime. Position sizing on BTC, ASX growth, and US tech can lean toward the upper end of edge.
- M2 YoY between 3 and 7 percent. Neutral regime. Default position sizing. Trade the cycle position individually rather than the regime.
- M2 YoY below 3 percent or contracting. Tightening regime. Reduce risk-on size, prioritise capital preservation, hold more AUD cash or short-duration AU government bonds.
- M2 YoY turning at extremes. The inflection from contraction to expansion (late 2023 in this cycle) and from peak expansion back toward neutral (mid-2021) are the highest-confidence regime change moments. Position accordingly when the inflection is confirmed by 2-3 consecutive monthly readings.
Methodology
- Source. Computed from FRED series M2SL (seasonally adjusted monthly M2).
- Formula. YoY% = (M2 this month / M2 same month prior year - 1) x 100.
- Earliest valid datapoint. 12 months after M2SL series start, so YoY values exist from 2001 onwards in this chart.
- Recession shading. NBER-dated US recessions.
- Static-first. If FRED is unreachable on a given build, the prior YoY snapshot is preserved.
Related tools
- M2 Money Supply level - the absolute USD billions view.
- Fed Funds Rate - the policy rate that drives M2 cycles.
- CPI Inflation YoY - the consumer-price downstream of M2.
- Fed Balance Sheet - the QE/QT quantity channel.
- Bitcoin Log Regression (AUD) - the BTC cycle structure M2 explains.
Frequently asked questions
It tells you how fast the US money supply is expanding or contracting in percentage terms relative to the same month one year ago. The YoY view strips out the level effect and surfaces inflection points: when M2 YoY is rising, the liquidity backdrop is improving (or stabilising at high growth); when it is falling, liquidity is tightening (or expanding more slowly). Sustained M2 YoY above 7 percent has historically coincided with strong risk-asset returns. Sustained M2 YoY below 3 percent or negative has coincided with drawdowns.
The 2022-2023 episode was the first sustained nominal M2 YoY contraction since 1949. M2 YoY peaked at over 26 percent in February 2021, then collapsed steadily as the Fed hiked from zero to 5.33 percent in 16 months. M2 YoY went negative in November 2022 and bottomed near minus 4.4 percent in April 2023. The contraction coincided with the 2022 bear market in BTC and US equities. It reversed in late 2023 as the Fed paused hiking, banks recapitalised after the SVB collapse, and the Treasury's QT-replenishment slowed.
Because the velocity of money (how fast each dollar in M2 changes hands) can move in the opposite direction. The 2020-2022 M2 surge produced asset-price inflation (housing, equities, crypto) before consumer-price inflation because velocity collapsed initially (lockdowns, mass-saving). As lockdowns ended and velocity normalised, the previously created M2 hit goods markets and CPI YoY peaked at over 9 percent in mid-2022. M2 leads, but the lag and velocity overlay make a direct M2-equals-CPI rule unreliable.
Loosely yes, but with caveats. The biggest M2 surges in history (2008-2009, 2020-2021) preceded major BTC bull markets. But the lag is 10-12 weeks on average and there are episodes where short-rate hikes overwhelm the M2 signal. The cleanest reading is: M2 YoY trending up + Fed Funds trending down + USD index trending down is a triple-bullish liquidity setup. The opposite combination is triple-bearish. Use M2 alongside the other macro variables, not in isolation.
The Reserve Bank of Australia publishes Australian M3 monthly. AU M3 is broader than US M2 and includes large-denomination time deposits, but the spirit is similar - it measures the total stock of money in the AUD economy. AU M3 growth and US M2 growth tend to correlate at about 0.5-0.6 over multi-year windows because both respond to global financial-conditions cycles. For AU-resident traders, US M2 matters more for global risk-asset positioning; AU M3 matters more for AUD-specific credit conditions and AU housing.
Computed from FRED series M2SL (seasonally adjusted monthly M2 in USD billions). The YoY series is derived locally on every build: for each month, current value divided by value 12 months prior, minus one, times 100. This is the standard formulation used by the Fed itself and by every macro research house. Static-first: the seed file ships with the YoY computed from anchor-interpolated M2 so the chart always renders.
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