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Nomura’s McElligott: The M2 Pro-Cyclical Signal May Be ‘Triggering’ In Stocks

Last week, Nomura's Charlie McElligott suggested that those looking for a real "reflation signal" should watch for signs that the surge in the US M2 money stock is abating. A decline in M2 would mean "money is put back to work on the corporate [and] individual levels [as] risk aversion and focus on savings turns into a more opportunistic outlook", he said. This would likely mean that at least some economic actors deem the economy "healthy enough to see loans and lines of credit paid back". Read more: Nomura’s McElligott Delivers The ‘Contrarian View’ On Surging M2 Money Supply Over the past several days, we've seen a nascent (there's the standard rotation adjective again) pivot away from secular growth leaders (e.g., tech), suggesting the baton might soon be passed to cyclicals, value, small-caps and other equities expressions that would benefit in the event the zeitgeist changes. In a brief Monday note, McElligott asks the following: Is the M2 money aggregates “reflation signal” observation discussed last week actually in the process of “triggering” in real-time, marking a possible inflection away from what has been the (risk-aversion and savings-tied slowdown)
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1 comment on “Nomura’s McElligott: The M2 Pro-Cyclical Signal May Be ‘Triggering’ In Stocks

  1. derek says:

    Question – How is money supply impacted when depositors withdraw money from their bank account, say to buy job robots? I am guessing that it has an immediate impact on the M-2 measure since it was a withdrawal.

    But what if the robot maker puts that money into their checking account? Is it a wash as far as M-2 goes?

    Or do we assume the robot maker has to pay their staff and suppliers so money does not return to the banking system right away?

    Thanks!

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