Here’s Why There’s Plenty Of Dry Powder To Buy Stocks
Today the Fed released its weekly money stock measures report, and, as
expected, liquidity continues to make new all-time highs.
Specifically the closely watched money supply measure known as M2–which
includes all physical money, checking accounts and NOW accounts, time-related
deposits, savings deposits, and non-institutional money-market funds–is now
growing at an annual 8.4%. Moreover, savings deposits climbed to a record $3.027
trillion dollars, and is now growing faster than $600 billion a year.
 As I have mentioned in the past,
many market observers continue to believe that the “reflation” directive
adopted by the Fed in its accommodative monetary policy is creating a bubble
in the equity markets. However, when one considers the current relationship
between the Wilshire 5000
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PowerRating) (the broadest measure of the US equity
markets), and the money supply (measured by Money with Zero Maturity–MZM) the
equity market is clearly no where near the bubble proportions reached in 2000.
In fact, MZM as a percent of the equity markets is a historically high
levels–62% to be exact, which is the same level seen in the late 80’s, as
evidence in the chart above. So there’s still plenty of dry powder on the
sidelines to come into the equity markets.