At the end of July, the total value of all global bonds and stocks peaked at a record $255 trillion (x2.5 since the global financial crisis), according to figures published this week by Bank of America Securities. In detail, the value of debt securities in circulation was $130 billion compared to $71 billion in 2008. The value of stocks amounted to $125 billion. Capitalization has almost quadrupled since the low in 2008 ($33 billion).
In 1992, the value of the stock was lower than the world’s GDP. It then rose significantly, reaching a peak of 270% in 2020, at the height of the Covid crisis, driven by massive recovery measures. Today it is equivalent to 233% of global GDP, a decline that reflects the significant economic recovery and performance “more common” non-US bonds and stocks in recent years, according to the qualification used by the US bank.
The market value of the Magnificent Seven (Apple, Microsoft, Nvidia, Alphabet, Amazon, Meta, Tesla, from largest to smallest on the current list) has increased by $10.4 trillion over the past 18 months. The five largest US companies accounted for 29% of the total capitalization of the S&P 500 in July, a record compared to 18% at the height of the dot-com bubble. The concentration of the US stock market is currently “abnormally high”judge Bank of America Securities. The Magnificent Seven are all ranked among the 10 largest companies in the world. Microsoft is the only company to appear in the Top 10 throughout the 21st century. The 10 largest companies today represent 25% of the total market value of the MSCI AC World, “a spectacular increase compared to the 10% recorded in March 2009.”
Wall Street is 6 times the size of Main Street
The outperformance of the growth sectors in relation to so-called value sectors has been a decisive feature of the global equity landscape over the past 15 years. The technology, telecommunications and healthcare sectors (growth) represent 44% of the capitalization, a level close to the historical record. On the other hand, the financial, energy and materials (value) sectors fell from 44% in 2008 to 25% today.
The global “tech” sector is worth $19 trillion. It is largely dominated by the US (81%) ahead of Taiwan (5.8%) and Japan (3.2%). The Eurozone accounts for 4.2%, of which 2.2% for the Netherlands (thanks to ASML) and only 0.4% for France. The US market also clearly dominates the telecommunications sector (75%) and the healthcare sector (69%).
The US represents 44% of the global government bond market and 65% of the global equity market (MSCI AC World index). China is the second largest government bond market in the world (14%) and Japan the second largest in equity terms, while Europe (including the UK and Switzerland) accounts for 15%. At 20%, Europe and Japan’s share of the global stock market has fallen sharply compared to 2008 (39%). Emerging markets (including China) account for 10%, but represent 87% of the world’s population, 78% of the Earth’s surface, 73% of CO₂ emissions and 59% of GDP (in purchasing power parity).
Over the past four years, the annual return of Chinese stocks is -10.4%; this is the biggest underachievement. Indian equities over the last 20 years have returned 12.3% annually, the best performance over the period.
In the United States, the value of financial assets (not only stocks and bonds, but also cash deposits, loans, private equity and pension fund reserves) is significantly higher than GDP, “which illustrates the financialization of the US economy and the high level of wealth inequality in the US”explains Bank of America Securities. “Wall Street is currently 6x Main Street, close to the record 6.3x reached in June 2021 and significantly higher than the 2.5x to 3.5x range prior to globalization and deregulation in the 1980s and early 1990s ‘ers.”
The US national debt is currently increasing by $1 trillion every 100 days. The amount of global debt, at $313 trillion at the end of July, represents more than three times the value of global GDP.
