What does "priced in M2" mean?

The Core Concept

"Priced in M2" means dividing an asset's price by the US M2 money supply. M2 includes cash, checking deposits, savings deposits, and money market securities—essentially the total amount of money in circulation.

This adjustment reveals how asset prices relate to monetary expansion. If a stock is up 100% nominally but M2 has also doubled, the M2-adjusted price would be flat—suggesting the price increase was due to money supply growth rather than real value appreciation.

Why This Matters

Nominal charts can be misleading. A stock reaching a new all-time high might seem impressive, but if it's below its previous M2-adjusted high, it suggests the price increase is partly or entirely due to monetary expansion.

This view helps investors understand whether price movements reflect:

• Real value changes (earnings growth, competitive advantages, etc.)
• Monetary expansion (more money in the system)
• A combination of both

What This Is Not

It's important to understand what this diagnostic lens does and doesn't tell you:

• Not a valuation model: This doesn't tell you if a stock is overvalued or undervalued
• Not a prediction tool: Past M2-adjusted performance doesn't predict future returns
• Not a complete picture: It isolates monetary expansion but doesn't explain fundamentals, earnings, or market sentiment
• Not a conspiracy theory: This is a neutral analytical tool using publicly available data

M2 vs CPI

You might wonder why we use M2 instead of CPI (Consumer Price Index) for adjustment:

• M2 measures money supply: The total amount of money in circulation
• CPI measures consumer prices: The cost of a basket of consumer goods
• Different purposes: M2 adjustment shows monetary expansion effects on asset prices, which can differ from consumer price inflation
• Asset prices vs consumer prices: Asset prices (stocks, real estate) often respond differently to money supply changes than consumer goods

How the Data Works

M2 data comes from the Federal Reserve Economic Data (FRED) and is updated weekly. For daily stock prices, we forward-fill the most recent weekly M2 value to each trading day.

The ratio (price ÷ M2) is calculated for each trading day, allowing you to see how the relationship between asset prices and money supply has changed over time.