Bank of America's strategy department released a report, as of July 2024, the total value of all stocks and bonds globally was $255 trillion, reaching a historical high. The U.S. economy exhibits the characteristics of "financialization" and high wealth inequality, with the market cap of the top five U.S. companies (Microsoft, Apple, Nvidia, Google, Amazon) accounting for 29% of the total market cap of the S&P 500. Investors have significantly poured into growth stocks, with the market cap of the technology/telecom/healthcare industry rising to 45% of the global stock market, while the relative share of the financial/energy/materials industry has significantly declined.
On Tuesday, Eastern Time, Michael Hartnett and his team at the Bank of America strategy department released a report evaluating the size and scope of global securities markets.
Michael Hartnett stated that currently global stock and bond markets are at historical highs, with the United States being the largest participant. Currently, the U.S. accounts for 65% of global stock market value and 44% of global bond market value. The U.S. economy exhibits characteristics of financialization and high wealth inequality.
Currently, the level of investor inflows into growth stocks is extremely exaggerated. In July 2024, the market capitalization of the top five U.S. companies (Microsoft, Apple, Nvidia, Google, Amazon) accounted for 29% of the total market capitalization of the S&P 500, and the market capitalization of the technology/telecom/healthcare industries accounted for 45% of global stock market value.
Q. What is the total value of all global stocks and bonds?
A. As of July 2024, it is $255 trillion, reaching a historical high. Since the low point of $104 trillion in 2008, the value of global stocks and bonds has increased 2.5 times.
Q. Is the bond market larger than the stock market?
A. Yes, but the gap between the two has narrowed. Since 2008, the value of global stocks has doubled, while the value of bonds has only doubled.
Is the value of global financial assets greater than global GDP?
Yes, it has been so since 1992. The relative value of securities to GDP peaked at 270% in 2020, influenced by the economic downturn due to the pandemic and government policy stimulus.
What is the total value of global debt?
313 trillion dollars, equivalent to three times global GDP. If S&P were to rate the planet's credit, Earth might be at BBB-, one notch above junk.
How many bonds in the global bond market are government-issued?
Most of them are issued by the U.S. government. With the U.S. borrowing around $1 trillion every 100 days, U.S. bonds overshadow all other assets. In 2008, U.S. bonds accounted for 28% of the total global bonds, and now they account for 44%.
Is the growth rate of global household and corporate debt similar to the growth rate of government borrowing?
Yes for corporate borrowing, no for household borrowing.
Can we use a graph to show the process of the global economy transitioning from excessive monetary policy to excessive fiscal policy?
A. Printing money.
Legend: The graph shows the total amount of global negative yielding debt from 2010 to 2024. From the graph, it can be seen that negative yielding debt reached its peak of $17.8 trillion in 2021, and then sharply declined in the following years, almost reaching zero by 2024. Michael Hartnett stated that in the past few years, as negative yielding debt decreased, the global economy has shifted from relying on loose monetary policy (such as low interest rates and quantitative easing) to relying more on fiscal policy (such as increased government spending and debt financing).
Q. Does the United States have the highest share in global stock value?
A. Yes, the United States accounts for 65%, reaching a historical high. Meanwhile, the share of Europe and Japan in the global stock value has declined from nearly 40% in 2008 to only 20% now.
Q. Does Wall Street have a higher total value than Main Street? (Wall Street typically refers to the financial industry and large corporations, especially the parts related to the stock market, investment banks, hedge funds, private equity, and other financial institutions. Main Street typically represents the economic activities of the general public and small and medium-sized enterprises, reflecting aspects such as production, consumption, and employment in the economy.)
A. Yes, much higher. The chart below 'Wall Street' includes everything except real estate, including cash deposits, loans, private equity and retirement fund reserves, as well as stocks and bonds. Its current value is slightly lower than the historical peak ratio of 6.3 times the US GDP set in June 2021. The steady rise in financial assets in the private sector in the United States since the 1990s reflects the 'financialization' of the US economy and its high level of wealth inequality.
Q. How much of the global stock market is in emerging markets?
A. In terms of value, it accounts for about one-fifth.
Q. How unusual is the current influx of investors into growth stocks?
A. It is unusual for both the US and the global markets.
Q. Are US stocks overvalued?
A. It can be said so. The valuation of US stocks is at historically high levels compared to US government bonds and corporate bonds. While US government bonds have significantly decreased in relation to commodity prices, US stocks have remained relatively stable.
Q. Is this bullish for Bitcoin?
A. Yes.
Editor/Somer