How Worrisome Is April’s Drop in M2?

How worried should we be about April’s $81.2 billion drop in M2? And what about the $91.2 billion drop in demand deposits from January through April? Furthermore, the Fed is about to start a second round of quantitative tightening (QT2) in June. Won’t that dry up liquidity, causing a recession and further stock market losses? Maybe, but:

(1) M2 is still more than $3 trillion above where it would have been now based on its pre-pandemic trend line. The ratio of M2 to nominal GDP (i.e., the reciprocal of monetary velocity) has remained at a record-high 89% since mid-2020, up from 70% just before the pandemic.