M2 Money Supply Sees Sharpest Drop Since Great Depression, Spooking Investors Despite Modern Safeguards Against Severe Downturn

M2 money supply has contracted 4.29% since March 2022, the biggest drop since the Great Depression. Past big M2 drops preceded economic depressions.

Recessions typically lead to stock market drawdowns as corporate earnings get hit.

However, monetary policy tools are much more advanced than in the 1930s, making a depression unlikely now.

Historically, recessions and bear markets are short-lived while economic expansions and bull markets last much longer.

Over the long run, time is on the side of stock market investors. Even with worrying monetary signals now, long-term outlook remains positive.