The nominal returns on your brokerage statement tell a flattering story. The S&P 500 has roughly tripled since 2014. Bitcoin has done considerably better than that. But a growing cohort of analysts argues these figures are, at best, incomplete—and at worst, a statistical mirage created by the Federal Reserve's balance sheet.
The argument is straightforward: when central banks expand the money supply dramatically, asset prices rise in nominal terms almost by definition. A dollar buys less of everything, including equities and cryptocurrency. To understand whether you have actually grown wealthier, you need to adjust for the denominator's debasement. When you do, the results are sobering.
The adjustment methodology
The exercise involves dividing asset prices by M2 money supply—the broadest commonly tracked measure of dollars in circulation, including cash, checking deposits, and easily convertible near-money. This creates a ratio showing how much of the total money stock a given asset commands. It is not a perfect measure of purchasing power, but it strips out the tailwind that all dollar-denominated assets receive when the Fed prints.
Applied to the S&P 500, the adjustment reveals that much of the post-2020 rally was simply monetary expansion showing up in equity prices. The index's M2-adjusted value in early 2026 is not dramatically higher than it was in 2018, despite nominal prices suggesting otherwise. The implication: corporate earnings and productivity gains have been real but modest; the rest has been inflation by another name.
Bitcoin's adjusted performance
Bitcoin advocates have long argued the asset serves as a hedge against monetary debasement—digital gold for an era of quantitative easing. The M2-adjusted analysis offers partial vindication. Bitcoin's ratio has genuinely expanded over the past decade, meaning it has outpaced money printing, not merely kept pace. But the outperformance is less dramatic than the nominal moonshot suggests.
More troubling for bulls: since late 2021, Bitcoin's M2-adjusted value has been range-bound, oscillating without a clear trend. The asset has held its ground against the money printer but has not extended its lead. For an asset class premised on scarcity in an inflationary world, treading water is not the narrative the faithful signed up for.
Why this matters now
The Federal Reserve's hawkish posture this month has reminded markets that the money-printing era, while not over, is on pause. If M2 growth remains subdued—or even contracts—the tailwind that lifted all boats disappears. Assets will need to justify their valuations through fundamentals: cash flows, earnings growth, utility. That is a higher bar than simply being a receptacle for newly created dollars.
Investors accustomed to the 2010s playbook—buy anything, the Fed has your back—may find the next decade less forgiving. The M2-adjusted lens suggests the easy gains were never quite as real as they appeared.
Our take
This analysis will not change anyone's behavior, and perhaps it shouldn't. Nominal returns are what you spend, and inflation-adjusted metrics can be gamed depending on which deflator you choose. But the exercise is useful as a humility check. The wealth effect of the past fifteen years has been substantially a monetary phenomenon, not a productivity miracle. Understanding that distinction is the first step toward realistic expectations—and realistic expectations, in markets, are the scarcest commodity of all.
