The US M2 money supply reached a record $23.34 trillion in August 2026, according to the Federal Reserve. That was 5.7% more than a year earlier.
M2 counts the money people and firms can spend quickly: cash, plus most bank deposits. It grew at a record pace in 2020 and 2021, then shrank for the first time in its history. Here is what M2 holds, how it has moved since 1959 and whether its growth has said anything about the next year for US stocks.
What is M2 money supply? M2 is the Federal Reserve's broad measure of US money. It counts cash, most bank deposits and money market funds held by individuals, which invest in cash and debt repaid within months.
M2 was $23.34 trillion in August 2026. It grew a record 26.8% in the year to February 2021.
In December 2022, M2 was lower than a year earlier for the first time since its records began in 1959. It stayed lower for 15 months.
Since 1960, when M2 grew 12% or more in a year, the S&P 500 index of large US companies had a median return of 3.4% over the next 12 months. Across all months it was 13.5%. Even so, M2 growth explains only about 2% of the ups and downs in returns.
What is M2 money supply?
The Federal Reserve publishes M2 each month in its H.6 release. M2 has five parts, minus one deduction:
Savings and other liquid deposits: savings accounts and similar bank accounts, including money market deposit accounts. These are bank deposits, separate from the money market funds below.
Checking deposits, which the Fed calls demand deposits.
Retail money market funds: funds held by individuals that invest in cash and debt due to be repaid within months.
Currency: notes and coins held by the public, outside banks and the government.
Small time deposits: fixed-term deposits of under $100,000.
Less retirement accounts: balances in Individual Retirement Accounts and similar plans are taken out, because early withdrawal carries large penalties.
What is in M2: the August 2026 figures
Source: Federal Reserve (H.6); YX Insights
The chart shows M2 in August 2026. Savings and other liquid deposits were the largest part, at $10.47 trillion, or 45% of the total. Checking deposits added $7.13 trillion. Currency was only $2.39 trillion, about 10%.
M2 leaves out bank reserves, the money banks keep at the Fed. Households and firms cannot spend reserves. We explain the difference in Fed Balance Sheet Explained.
M1 vs M2
M1 is the narrower measure: currency plus checking, savings and other liquid deposits. It was $19.99 trillion in August 2026.
Since May 2020, savings accounts have counted in M1, because a limit on withdrawals from them was removed. So M1 is now 86% of M2.
M2 money supply since 1959
Source: FRED (M2SL); YX Insights
The chart shows M2's growth over the previous 12 months, every month since 1960. The median was 6.6% a year. M2 was $286.6 billion in January 1959 and $23.34 trillion in August 2026, 81 times larger.
The record before 2020 was 13.8%, in February 1976. In the year to February 2021, M2 grew 26.8%.
The government borrowed to pay relief to households. From early 2020 to the end of 2021, its debt held by the public rose by $5.94 trillion. The Fed bought $3.15 trillion of Treasury debt over almost the same period. We trace that money in Does Money Printing Cause Inflation?
Then M2 shrank. In December 2022, it was lower than a year earlier for the first time in the series. The low was a 4.6% fall, in April 2023. Growth turned positive again in March 2024, after 15 months below zero.
In dollars, M2 peaked at $21.79 trillion in March 2022. It fell 4.8%, to $20.74 trillion in October 2023, then passed its old peak in May 2025.
St. Louis Fed economist Christopher Neely tied the fall to the Fed's tightening, its moves to cool the economy.
The Fed ended its bond buying in March 2022. In the same month, it began raising interest rates. We explain the bond buying in What Is Quantitative Easing?
Does M2 growth predict the stock market?
To test this, we took every month from January 1960 to June 2025. For each, we paired M2's growth over the past year with the return over the next 12 months on the S&P 500, an index of 500 large US companies. Returns include reinvested dividends.
Each return starts only after that month's M2 figure was published. That gives 786 months of data.
Correlation measures how closely two series move together, from −1 to 1. Zero means no link at all. Here, the correlation was −0.15.
That is weak and negative. Faster M2 growth tended to come before lower returns. M2 growth explains about 2% of the ups and downs in the next year's return.
S&P 500 returns by M2 growth, 1960 to 2025
Source: FRED (M2SL); Robert Shiller, Yale; YX Insights
The chart groups the months by M2 growth. When M2 grew 12% or more over a year, the median S&P 500 return over the next 12 months was 3.4%. Across all months, it was 13.5%.
The three middle groups were close to each other, at 15.5%, 13.5% and 15.2%.
The two end groups look very different. The highest median, 25.9%, followed the months when M2 fell. Each end group rests on a few episodes. The next section explains why they tell us little.
M2 growth over the past year | Months | Median S&P 500 return, next 12 months | Mean | Months followed by a gain |
|---|---|---|---|---|
Below 0% | 15 | 25.9% | 25.6% | 100% |
0% to 4% | 126 | 15.5% | 16.4% | 98% |
4% to 8% | 399 | 13.5% | 10.8% | 76% |
8% to 12% | 176 | 15.2% | 12.9% | 74% |
12% and above | 70 | 3.4% | 4.8% | 63% |
All months | 786 | 13.5% | 11.9% | 78% |
Source: FRED (M2SL); Robert Shiller, Yale; YX Insights
The table adds the mean and the share of months followed by a gain. Months with M2 growth under 4%, including the 15 months when M2 fell, were followed by a gain in 138 of 141 cases.
Why the M2 signal is weaker than it looks
The evidence is thinner than the month counts suggest, for three reasons.
The windows overlap. Each month's 12-month return shares 11 of its 12 months with the next month's. So the 786 returns are not 786 separate results. They hold only about 65 separate, non-overlapping 12-month periods.
Fast growth came in a few bursts. The 70 months of 12% or more came in 1971 to 1973, 1975 to 1977, 1983 and 2020 to 2021. Inflation on the Consumer Price Index averaged 6.6% a year from 1971 to 1977. After inflation, the median return across all 70 months of fast growth was −3.0%.
One episode makes up the negative group. All 15 months of falling M2 came between December 2022 and February 2024. Each was followed by a rise in the S&P 500, of between 6.4% and 37.6%. That is one stretch of market history, counted 15 times.
The direction held in both periods before 2020. The correlation was −0.23 from 1960 to 1989. From 1990 to 2019, it was −0.14. Still, the link is weak.
How to read the M2 figure
A few points help:
When it comes out. The H.6 release comes out on the fourth Tuesday of each month. The next one, on 27 October 2026, covers September. FRED, the St. Louis Fed's data site, carries M2 as M2SL.
Watch growth, not the level. M2 rose in 64 of the 66 calendar years from 1960 to 2025, so the yearly change says more than the total.
Read it with inflation. Fast M2 growth matters for prices only if the money gets spent. We cover the causes of inflation in What Is Inflation?
Place it in history. August 2026's 5.7% sits in the 4% to 8% group, which covers 399 of the 786 months since 1960.
M2 is cash plus the deposits and funds people can spend quickly, $23.34 trillion in August 2026. Since 1960, its growth has been a weak guide to stocks: after its fastest bursts, the S&P 500's median return was 3.4%, against 13.5% for all months.
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Common questions about M2 money supply
What is the difference between M1 and M2?
M1 is the narrow measure of money: currency, checking deposits, savings deposits and other accounts you can draw on at once. M2 adds small time deposits and money market funds held by individuals, minus retirement accounts. In August 2026, M1 was $19.99 trillion and M2 was $23.34 trillion.
Is the M2 money supply increasing?
Yes. M2 reached a record $23.34 trillion in August 2026, 5.7% more than a year earlier. It shrank from March 2022 to October 2023, falling 4.8%. It passed its old peak of $21.79 trillion in May 2025. The Fed publishes the next figure, for September, on 27 October 2026.
Does M2 money supply affect the stock market?
M2 growth has said little about the stock market's next year. From 1960 to 2025, the correlation between M2's yearly growth and the S&P 500's return over the next 12 months was −0.15. When M2 grew 12% or more, the median return over the following year was 3.4%, against 13.5% for all months. Most of those fast-growth months came in 1971 to 1977 and 2020 to 2021.
Does M2 growth cause inflation?
M2 growth can lead to inflation, but only when the new money gets spent faster than the economy can produce more. From August 2008 to December 2014, M2 grew 6.6% a year. Inflation averaged 1.6% a year from 2009 to 2014. After M2 grew 26.8% in the year to February 2021, inflation peaked at 9.1% in June 2022. We compare both episodes in Does Money Printing Cause Inflation?
DISCLAIMER: This article is strictly educational. Any information or analysis in this note is not an offer to sell or the solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice and nor should it be relied upon to make investment decisions. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice.