S&P 500 to M2 Money Supply Ratio: Liquidity-Adjusted Equity Valuation Monthly Since 1959

The S&P 500 to M2 Money Supply Ratio is an Eco3min monthly composite that divides the S&P 500 price index by M2 broad money supply (in billions of USD). Available since January 1959, it answers a question that simple equity charts cannot: are nominal equity gains the result of corporate earnings growth and valuation expansion, or do they merely track monetary expansion? The S&P 500 to M2 Ratio compressed sharply during the 2020–2021 M2 surge (over +25% M2 in 24 months) and remained well below its pre-2020 trajectory through 2026, providing a quantitative anchor for the “monetary illusion” debate.

Dataset: S&P 500 to M2 Money Supply Ratio (1959–2026) · Updated —

Source: FRED series SP500 · S&P Dow Jones Indices (SP500) & Federal Reserve (M2SL) via FRED

Macro Takeaway

Construction & Components

The S&P 500 to M2 Money Supply Ratio is built by aligning the S&P 500 price index and the M2 broad money aggregate on a monthly grid, then dividing the index level by M2 in billions of USD. The result is a unitless number that scales the equity market against the size of the domestic monetary base.

Formula:

SP500_M2_Ratio = SP500 / M2SL

Components:

• S&P 500 Price Index — FRED series SP500 (S&P Dow Jones Indices via FRED) — daily, end-of-month value used for monthly alignment. The numerator of the ratio.
• M2 Money Supply — FRED series M2SL (Federal Reserve H.6 release) — monthly, seasonally adjusted, billions of USD. The denominator.

Frequency reconciliation: M2SL is published monthly with end-of-month observations; the S&P 500 is sampled at the same end-of-month timestamp to align with the M2 frequency. The composite is therefore monthly, not daily, despite the daily availability of the S&P 500.

Coverage: 1959–2026, limited by the start of the M2SL series on FRED (January 1959). For pre-1959 equity-to-money analysis, the M1 base or the Friedman–Schwartz monetary aggregates would be required.

Dataset Overview

Dataset Variables

The CSV and Excel files contain the following columns.

Column names match the CSV headers exactly.

Download the Complete Dataset

The full dataset is available in CSV and Excel formats.

FRED Direct CSV Access

The two FRED series used to construct the S&P 500 to M2 Money Supply Ratio can be retrieved directly:

https://fred.stlouisfed.org/graph/fredgraph.csv?id=SP500
https://fred.stlouisfed.org/graph/fredgraph.csv?id=M2SL

Direct CSV Access — Eco3min Structured Dataset

https://eco3min.fr/dataset/sp500-m2-ratio.csv

This URL returns the pre-aligned monthly composite with the ratio pre-computed. It can be used directly in pandas, R, curl, or any data tool.

Using the Dataset in Python

import pandas as pd

url = "https://eco3min.fr/dataset/sp500-m2-ratio.csv"
df = pd.read_csv(url, parse_dates=["date"])

print(df.head())
print(df["sp500_level"].describe())

Using the Dataset in R

library(readr)

url <- "https://eco3min.fr/dataset/sp500-m2-ratio.csv"
df <- read_csv(url)

head(df)
summary(df$sp500_level)

Both examples load the dataset directly from the URL — no download or API key required.

Methodology

The S&P 500 to M2 Money Supply Ratio is recomputed monthly by an Eco3min pipeline. The pipeline pulls the daily S&P 500 series from FRED, samples the end-of-month closing value, and divides it by the corresponding M2SL observation released by the Federal Reserve. Both series are aligned to month-end timestamps to avoid intra-month drift between the daily equity index and the monthly money supply aggregate.

The pipeline runs after each Federal Reserve H.6 release (typically the fourth Tuesday of each month for the previous month’s M2 data). No interpolation or seasonal re-adjustment is applied: the M2SL series is already seasonally adjusted by the Federal Reserve, and the S&P 500 close is used as published. The historical series back to January 1959 is rebuilt at each refresh to incorporate any FRED revisions to M2SL.

Data Quality & Provider Notes

The S&P 500 to M2 Money Supply Ratio inherits the latency and revision characteristics of its slowest component, M2SL. Three points to be aware of:

• Latency dictated by M2SL. The composite cannot be more recent than the latest FRED M2SL observation, which is published roughly two weeks after the end of the reference month. The S&P 500 component is available the same day, but the ratio for month t is only finalized when M2SL for month t is released.
• M2 revisions propagate to the ratio. The Federal Reserve revises M2SL when seasonal factors are updated (typically each January) or when source data on retail money funds is restated. Any revision to M2SL automatically rebuilds the historical ratio at the next Eco3min refresh.
• No widely cited alternative source. Unlike single-series datasets, no Bloomberg, Refinitiv, or academic provider publishes the S&P 500 to M2 ratio as a native series. Practitioners build it ad hoc. The Eco3min composite provides a stable, pre-computed reference with consistent month-end alignment, removing the ambiguity of using monthly average versus end-of-month equity values.

What This Index Captures (And What It Doesn’t)

The S&P 500 to M2 Money Supply Ratio is a normalization, not a valuation model. Understanding what it measures — and what it does not — is essential to use it responsibly.

What it captures:

• The mechanical scaling of the equity market against the domestic broad money base
• Periods when nominal equity returns visibly diverge from monetary expansion, in either direction
• A long historical context (1959–2026) covering multiple monetary regimes, including the pre-Volcker inflationary era, the Great Moderation, the QE decade, and the post-COVID monetary surge

What it does NOT capture (common misinterpretations):

• A causal link between M2 and equity prices. The ratio is an accounting identity, not a behavioral model. Empirically, the contemporaneous correlation between M2 growth and S&P 500 returns is weak outside the 2020–2021 episode. The Eco3min research on the liquidity illusion documents this empirical weakness for the closely related WALCL series.
• A valuation metric in the classical sense. The ratio has no anchor in earnings, dividends, or cash flows. A high or low reading does not directly imply over- or under-valuation in the way CAPE or P/E does. For valuation context, see the S&P 500 CAPE Ratio.
• Total system liquidity. M2 excludes large institutional money flows (RRP, TGA, repo) that affect risk asset funding on a high-frequency basis. The Net Liquidity Index provides a finer measure of these dynamics.
• Real (inflation-adjusted) equity returns. Dividing by M2 is not equivalent to deflating by CPI. M2 grows for reasons unrelated to consumer price inflation (credit expansion, bank balance sheet changes), and CPI can move independently of M2. For real equity returns, see the S&P 500 historical total returns series.

The ratio is best read as a long-horizon normalization indicator rather than a tactical signal. Its analytical value lies in spotting multi-year regime shifts in the equity-versus-money relationship, not in short-term market timing.

Historical Regimes

The S&P 500 to M2 Money Supply Ratio has traversed several distinct regimes since 1959. Reading the series in this regime framework, rather than as a single trend, clarifies what the indicator does and does not signal at each turning point.

• 1959–1968 — Steady post-war expansion. The ratio rose modestly as equity gains outpaced M2 growth. Inflation was contained; M2 grew at roughly 4–7% annually.
• 1969–1982 — Stagflation compression. M2 expanded rapidly while equity prices stagnated in nominal terms. The S&P 500 to M2 ratio reached its multi-decade trough around 1982, capturing the “death of equities” episode in real and monetary terms simultaneously.
• 1982–2000 — Disinflationary equity supercycle. The ratio climbed steeply, peaking at the 2000 dot-com top. Equity gains outran M2 expansion by a wide margin for nearly two decades.
• 2000–2009 — Two corrections. The dot-com bust and the GFC both compressed the ratio sharply, though M2 growth was relatively contained during this period.
• 2009–2019 — QE-era recovery. The ratio recovered alongside the S&P 500, but at a more measured pace than 1982–2000 because M2 was also expanding meaningfully.
• 2020–2021 — Monetary surge. M2 grew over +25% in 24 months while equities rose roughly +40%. The S&P 500 to M2 ratio made a much smaller new high than the S&P 500 itself, visualizing the “monetary illusion” argument quantitatively.
• 2022–2026 — Stabilization. M2 contracted for the first time since 1959 in 2022–2023, then resumed slow growth. The ratio recovered toward but did not exceed its 2021 peak.

For deeper analysis of the equity–liquidity relationship, see the Eco3min study on the liquidity illusion and the Excess CAPE Yield for a valuation-anchored counterpart.

Related Macroeconomic Datasets

The S&P 500 to M2 Money Supply Ratio sits at the intersection of equity valuation and monetary aggregates. The datasets below provide the components, alternatives, and broader market context for cross-referencing.

Related Research

For the analytical perspective on how broad money relates to equity prices, including a critique of mechanical “liquidity drives stocks” narratives, see the Eco3min research below.

Macroeconomic Dataset Hub

This dataset is part of the Eco3min macro-financial data repository.

Explore the Eco3min Dataset Hub

Sources

• S&P Dow Jones Indices — S&P 500 price index (FRED series SP500)
• Federal Reserve, H.6 Money Stock release — M2 money supply, seasonally adjusted (FRED series M2SL)

Dataset Reference

Eco3min Research. (2026). S&P 500 to M2 Money Supply Ratio (1959–2026).<br> https://eco3min.fr/en/sp500-m2-money-supply-ratio-dataset/