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  • Writer's pictureRobert Baharian

This one chart...the shrinking US stock market

When it comes to world stock markets, the US is truly in a league of it's own since it declared independence from the rest of the world on 9 March 2009 when world stock markets hit their respective bottoms following the meltdown of the the world's financial system.

In today's chart we look at the shrinking size of the US stock market. What the chart below is showing us is the total market capitalisation of US listed companies in orange, and the number of companies in listed on the US stock market in blue. We can see the total value of US listed companies has skyrockets to around $12t in 2009 to $31t today. In fact, the US stock market went from making up 15% of world stock markets in 1899, to over 60% today. Yet, the number of stocks listed in the US has shrunk from almost 9,000 in the late 90's to around 4,500 today.

The two primary reasons for this is 1) M&A, and 2) companies no longer need to go public to raise capital - especially in the US. Whilst I say this, the number of stocks globally have exploded - primarily in Asia.

Although it may appear on surface that the US stock market has done extraordinarily well, which is has, it pays lift the bonnet and understand how. There are fewer and fewer companies listed on the US stock market, yet there are more and more investors feeding less and less companies, which means one thing - the fewer and fewer companies get bigger and bigger.

Within a market there is a market. And understanding these markets, the way they work together, their behaviour, and why and how they've come to be may help investors make better informed decisions.

Diversified investors need not worry.


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