Esteemed investor Mark Mobius has pointed out a potential risk that could disrupt the U.S. markets, given the recent market volatility.

What Happened: Mobius, the founding partner of Mobius Capital Partners, has been closely monitoring the growth of the U.S. M2 money supply. The M2 money supply, which encompasses cash held in certain deposits or other savings mediums, reached a peak of $21.722 trillion in April 2022 but fell to $21.025 trillion in June 2024, a decrease of approximately 3.21%. According to Mobius, this decline is historically significant as it represents the largest drop in over 90 years, CNBC reported on Monday.

Mobius voiced his concerns that if the M2 money supply continues to fall and fails to keep up with economic growth, there could be a reduction in capital available for discretionary spending. This has been a key driver of the current economic expansion and bull market on Wall Street.

"Look for companies with little or no debt, moderate earnings growth, and high return on capital, and get ready to re-enter the market," Mobius advised.

Despite the risks, Mobius still sees potential in tech stocks, particularly those in the semiconductor industry. He thinks that companies like TSMC (NYSE:TSM), United Micro (NYSE:UMC), and others will continue to thrive due to increasing global demand and the rise of AI. However, he cautioned that companies with weak balance sheets, low or no earnings growth, and high debt could face significant challenges.

Why It Matters: This warning comes after a period of optimism in the U.S. markets. The S&P 500 and Nasdaq 100 had extended their winning streak to eight consecutive sessions, as traders remained optimistic about the U.S. economic outlook and improving financial conditions.

However, Mobius had previously predicted further economic struggles following a stock market crash, attributing it to rising global geopolitical tensions and the upcoming U.S. presidential election. Additionally, concerns have been raised about the government printing too much money, which could result in inflation.

Price Action: The SPDR S&P 500 ETF Trust (NYSE:SPY) which tracks the S&P 500 closed at $559.61 while Invesco QQQ Trust, Series 1(NASDAQ:QQQ) closed at $481.27, according to Benzinga Pro.

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This story was generated using Benzinga Neuro and edited by Pooja Rajkumari