Billionaire venture capitalist Chamath Palihapitiya says staying bullish on the markets will pay off, pointing to two key financial factors driving his conviction.

In a new episode of the All-In Podcast, Palihapitiya takes a close look at the M2 money supply chart, which has been on the up and up.

The billionaire notes that M2 growth is one of the key reasons why the S&P 500 is in the midst of a strong uptrend.

“If I was a betting man… I think the free money trade here is to be levered long. I think you can make a lot of money right now. Why is that? The first chart I want to show you is the velocity of money… This is the M2 money supply. It’s a measure of how much money is circulating in the economy. 

What this shows is the impact of rates, where we were able to start to slow down and contract the money supply. But then as the economy stabilized and people started to project what was possible in 18 to 24 months, you started to see money coming back into the system. That’s what has given a bid to the equity markets.”

The billionaire is also keeping a close watch on the amount of money invested in money market funds, which are financial instruments that provide yields that are largely influenced by the prevailing interest rates set by the Federal Reserve.

Palihapitiya says that once the Fed starts cutting rates, trillions of dollars in capital stashed in money market funds will likely be invested in the stock market.

“Look at how much money is sitting in money market funds, and what this starts to show you is you have trillions of trillions of dollars of dry powder in the sidelines that will need to find a home. 

I think that [Fed chair] Jerome Powell is in an increasingly [untenable] situation because he will be looked at as politicizing the office of the Federal Reserve. There is enough data that can justify cutting rates. If you cut rates, two things will happen. 

Number one is people will take some amount of money out of the money market funds because they will want to go and seek superior returns somewhere else. It will increase the velocity of money at the same time. You put those two things together that is a bid to the equity markets.

And so if we’re at an all-time high today with rates at 4.5% and Powell’s back is against the wall to cut, the only road from here is probably up…

I think if Powell starts an aggressive cutting program… you could see the S&P 500 at 7,000.” 

As of Monday’s close, the S&P 500 is trading at record-high levels of 6,204.

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President Donald Trump’s advisor on crypto and artificial intelligence (AI), David Sacks, is highlighting a catalyst that could dramatically increase demand for US treasuries.

In a new Bloomberg interview, Sacks says the passing of the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act) in the U.S. Senate and the potential signing of the piece of legislation into law offers “regulatory clarity and stability” for the stablecoin crypto sector.

According to Sacks, the GENIUS Act could trigger massive demand for US government debt from various parts of the world.

“… the [stablecoin] float is expected to grow from, call it, roughly $250 billion to trillions of dollars. And that would create more demand for the US dollar internationally. I think you could see other economies start to dollarize from the bottom up as their citizens would prefer to use US digital dollars as opposed to whatever fiat currency they’re using. And that would create potentially trillions of dollars of new demand for US treasuries.”

The GENIUS Act will also spur innovation in the payments industry, according to the White House advisor.

“And I think that the bill will provide the framework that will give confidence to a lot of traditional financial players to enter the space. And so I think you’re going to see new stablecoin products. And I think you will also see stablecoins being used as payments. I think this is one of the really exciting things about the bill, is that blockchain infrastructure will be used as a new kind of dollar-based payment system, that’s faster, more efficient, smoother. It’s a payment system of the future.”

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