U.S. Money Supply Has Made History Twice in the Last 3 Years -- Including a First Since the Great Depression -- and It Foreshadows a Wild Ride for Stocks in 2026
The U.S. M2 money supply has reached unprecedented levels while also experiencing rare declines in recent years. In October 2025, it climbed to a record high of nearly $22.3 trillion. Yet this growth follows a sharp contraction between 2022 and 2023—the first of its kind since the Great Depression.
From April 2022 to October 2023, the M2 money supply shrank by 4.76%. This marked only the fifth time in 156 years that such a steep year-over-year drop occurred. Each previous instance coincided with economic depressions and severe stock market downturns.
Over the past year, M2 growth rebounded to 4.08%. While positive, this rate remains modest compared to historical averages. Low single-digit expansion has often preceded economic weakness or stock market struggles. Looking ahead, 2026 presents additional risks. A divided Federal Reserve, elevated stock valuations, and potential disruptions from trade policies could destabilise markets. Concerns also linger about speculative bubbles in AI and quantum computing sectors. Historical patterns suggest volatility may lie ahead. However, no specific timeline has been identified for when M2 fluctuations might trigger another market upheaval.
The M2 money supply now sits at an all-time high, but its recent swings have been extreme by historical standards. With economic and political uncertainties looming, analysts warn of a turbulent period for stocks in 2026. The combination of past trends and current conditions points to heightened risks for investors.
