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Money Supply Growth And Stock Markets: Where The Cash Flows
Description
Money supply in America is growing at its fastest pace since 2022, reaching 23 trillion dollars, and Felix Nikolas Prehn argues this matters more for stock prices than the economic headlines suggest. The episode sets out why high oil prices now benefit American shareholders rather than draining the economy, given that the United States produces roughly 66 per cent more crude than Saudi Arabia. It examines the collapse in real estate job openings, which halved between July and August to their lowest level in the available data, and explains how that weakness may give the Federal Reserve cover to stop raising rates. Prehn notes that 82 per cent of S and P 500 constituents are down even as the index rises, meaning printed money is flowing into a narrow band of stocks rather than lifting the broad market. He draws on the AAII sentiment survey, where 48 per cent of respondents expect lower prices, and historical episodes in which extreme bearishness preceded strong rallies.
In this episode:
00:00 Scary headlines each have a second half the news omits
02:01 America is the largest oil producer and benefits from high prices
04:06 Oil company fundamentals and cash flows are improving
05:07 82 per cent of S and P 500 stocks are down despite index gains
06:37 Skilled money follows the trend rather than buying and holding
07:38 Real estate job openings halved to their lowest recorded level
09:10 Weak housing data may give the Fed cover to ease off rates
10:11 The stock market is not an economic thermometer
Sources mentioned:
U.S. Energy Information Administration (oil production data), https://www.eia.gov
Federal Reserve M2 money supply data, https://www.federalreserve.gov
Bureau of Labour Statistics (job openings data), https://www.bls.gov
American Association of Individual Investors (AAII) sentiment survey, https://www.aaii.com
Felix Nikolas Prehn is an economist and former investment banker. He co-founded TradeVision.io and founded Winston Daily and The Prehn Institute. The Prehn Institute gives no financial advice, and neither does this podcast.
Newsletter: Winston Daily, https://winstondaily.com
Research: https://prehninstitute.com
Author site: https://felixprehn.com
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