For the past decade, monetary easing measures implemented by the U.S. Federal Reserve expanded the monetary base but not the money supply. The surge in money supply, aka M2, is a major financial change currently unfolding now.
M2, currency held by the public, plus checking, savings and money market accounts, skyrocketed like never before following the $5.5 trillion unprecedented US stimulus and aid payments in response to the pandemic.
After the global financial crisis of 2008, Fed easing was implemented principally through its purchases of US long-term bonds. That added liquidity to the monetary base, but it did not boost M2.
Fed easing is different this time. Direct payments from Uncle Sam have loaded Americans with an unprecedented cash reserve that’s just been waiting to be spent.
The stock market is at record highs and could keep rising, but inflation risk could cause a sharp decline. Tax hikes are simmering, leaving this last bit of time to act if your adjusted gross income is more than $400,000 or if you, your parents, or grandparents own assets worth more than $3.5 million.
That’s what’s happening now in wealth management.