Worried that slowing growth in U.S. money supply (M2) is a sign of economic trouble? Don’t be. Most of the weakness can be traced to retail money market funds.
Money market funds generally make up 13% of M2, according to Stéfane Marion of National Bank Financial.
The economist notes that investors have grown more confident in recent months, opting to reduce their holdings of money market mutual funds by a near record amount.
Excluding that component, M2 is actually growing at a 6% annual clip. “This is actually pretty robust growth when compared to previous recoveries,” he said.