Investors are facing a peculiar predicament as holding cash becomes a more enticing option than venturing into the stock market. This scenario, last observed before the Dot Com bust, raises concerns about the current state of the financial landscape.
The M2 money supply, a key indicator of the total amount of cash circulating in the economy, is contracting at levels reminiscent of the Great Depression. This contraction suggests a scarcity of money, contrary to the common belief that the economy is flooded with liquidity.
Historically, periods when cash outperforms stock market gains have been precursors to economic downturns. The cautionary tale from the Dot Com bust serves as a stark reminder of the potential risks associated with such a trend.
Investors are now grappling with the dilemma of whether to embrace the safety of cash or navigate the uncertainties of a volatile stock market. The warning signs are clear, prompting many to reassess their investment strategies in anticipation of possible economic challenges ahead.
Sources:
Cash is now a more attractive alternative to stocks
This last happened right before the Dot Com bust
You know something is wrong when taking risk is rewarded less than simply holding cash pic.twitter.com/gbtVVTLOnM
— Game of Trades (@GameofTrades_) February 15, 2024
WARNING: M2 money supply is contracting at levels last seen during the Great Depression pic.twitter.com/7MzruZKuPn
— Game of Trades (@GameofTrades_) February 15, 2024