Understanding the Scale of the Global Financial Markets with 20 Charts

On Tuesday, Eastern Time, Michael Hartnett and his team from the strategy department of Bank of America released a report evaluating the scale and scope of global securities markets.

Michael Hartnett stated that currently, both 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 value and 44% of global bond value. The U.S. economy exhibits characteristics of "financialization" and high wealth inequality.

Currently, investors are flocking to growth stocks to an exaggerated degree. As of July 2024, the market value of the top five U.S. companies (Microsoft, Apple, Nvidia, Google, Amazon) accounted for 29% of the total market value of the S&P 500, and the market value of the technology/telecom/healthcare industry accounted for 45% of the global stock market.

Q: What is the total value of all global stocks and bonds?

A: As of July 2024, it is $255 trillion, reaching a historic high. Since the low point of $104 trillion in 2008, the value of global stocks and bonds has more than doubled.

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 increased by half.

Q: Has the total value of global financial assets exceeded global GDP?

A: Yes, it has been the case since 1992. The relative value of securities to GDP peaked in 2020 at 270% of GDP, influenced by the economic downturn due to the pandemic and government policy stimulus.

Q: What is the total value of global debt?

A: $313 trillion, equivalent to three times global GDP. If Standard & Poor's were to rate the planet's credit, Earth might be at BBB-, one notch above junk Q. How many bonds in the global bond market are issued by governments?

A. 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 bond market, now it's 44%.

Q. Is the growth rate of global household and corporate debt similar to the growth rate of government borrowing?

A. Corporate borrowing is, household borrowing is not.

Q. Can a single chart illustrate the global economy's transition from excessive monetary policy to excessive fiscal policy?

A. Printing money.

Caption: The chart shows the trend of total global negative yielding debt from 2010 to 2024. It peaked at $17.8 trillion in 2021 and sharply declined in the following years, almost reaching zero by 2024. Michael Hartnett stated that in recent years, as negative yielding debt decreased, the global economy shifted from relying more on loose monetary policies (such as low interest rates and quantitative easing) to relying more on fiscal policies (such as increased government spending and debt financing).

Q. Does the U.S. hold the largest share of global stock value?

A. Yes, the U.S. holds 65%, reaching a historical high. Meanwhile, Europe and Japan's share of global stock value has halved from nearly 40% in 2008 to only 20% now.

Q. Does Wall Street's total value exceed Main Street's value? (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 usually represents the economic activities of ordinary people and small businesses, reflecting aspects of the economy such as production, consumption, and employment.)

A. Yes, by a significant margin. The "Wall Street" chart below includes everything except real estate, such as cash deposits, loans, private equity, pension fund reserves, stocks, and bonds. Its current value is slightly below the historical high ratio of 6.3 times the U.S. GDP set in June 2021 The steady increase in financial assets of the private sector in the United States since the 1990s reflects the 'financialization' of the U.S. economy and its high level of wealth inequality.

Q. How many stocks in the global stock market are in emerging markets?

A. By value, approximately one-fifth.

Q. How unusual is the current rush of investors into growth stocks?

A. Very unusual for both the U.S. and globally.

Q. Are U.S. stocks overvalued?

A. It can be said so. Relative to U.S. government bonds and corporate bonds, the valuation of U.S. stocks is at historically high levels. While U.S. government bonds have seen a significant decline relative to commodity prices, U.S. stocks have remained relatively stable.

Q. Is this good news for Bitcoin?

A. Yes