Despite Record Levels, the Stock Market Is Actually Shrinking in Size

Like that box of macaroni in your kitchen cupboard, the U. S. stock market has become a lot more expensive but has actually shrunk in terms of quantity.
In 1975, U. S. domestic companies that traded on U. S. exchanges totaled 4,819. Forty years later, the market has shrunk to less than 4,000, despite a tripling in GDP.
If you take a shorter time span of 20 years, which included the craze of listing companies known to Wall Street insiders as ‘crap’ and ‘dogs,’ the numbers are worse. In September of last year, Jim Clifton, the Chairman and CEO of Gallup, the polling company, reported the following:
‘The number of publicly listed companies trading on U. S. exchanges has been cut almost in half in the past 20 years – from about 7,300 to 3,700. Because firms can’t grow organically – that is, build more business from new and existing customers – they give up and pay high prices to acquire their competitors, thus drastically shrinking the number of U. S. public companies. This seriously contributes to the massive loss of U. S. middle-class jobs.’
As of early 2017, according to Ernst & Young, just 140 of these publicly traded companies represented more than half of the total market value of all stocks traded in the U. S. Another stark example of the dangerous trend of wealth concentration in the U. S.

This post was published at Wall Street On Parade on December 20, 2017.