I just love this chart — it essentially argues the case that US markets have been over valued  since around 1990:


courtesy of the Chart Store

Category: Markets

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

41 Responses to “Market Cap of NYSE + Nasdaq as a % GDP”

  1. santamonica says:

    This graph gets more interesting if you take an ‘enterprise value’ approach and layer in the total debt (private, corp & govt) to gdp % and treat equity value/market value as a residual to see if the market is overvalued.

    With the skyrocketing growth in debt over the past 50 years, the result is there isn’t much equity value…

  2. Jim C says:

    Would need to see another chart of just US based companies – right?

  3. Mannwich says:

    Same as it ever was.

  4. Mannwich says:

    The bubble market and economy rolls onward. You cannot stop it. You can only hope to contain it.

  5. good chart, Just curious what Percentage of revenues from companies on the NYSE and NASDAQ are earned outside the U.S.?

  6. TripleB says:

    Can you really draw that conclusion – the number of public companies is always in flux (due to IPO trends, going-private transactions, etc.). So the aggregate market cap can be changing for reasons independent of GDP. It just seems like a stretch to make a “the market is over/under valued” conclusion based on this.

  7. RPF says:

    Lots of those companies have significant overseas operations–and I would guess that they have grown over time. A better comparison that accounts for this would be to use the old GNP in the denominator.

  8. DeDude says:

    Why exactly would we expect that market cap at NYSE and GDP should grow at the same rate? I would not expect expenditure on food to grow at the same rate as the GDP (as we get more efficient it should take less of the GDP to feed us). Nor would I expect expenditure on vacations to grow at the same rate as GDP (as we get richer we would spend a higher proportion of our wealth on vacations). It is obvious that the % has increased, but why would we think that it should stay constant?

  9. constantnormal says:

    @Jim C — what do you mean “just US based companies”?

    Last time I checked, the fraction of NYSE companies that were ADRs of foreign firms was a fairly small slice, and in the case of NASDAQ, would seem to be zero.

    Or do you mean “excluding multinationals”?

  10. veritatis cupitor says:

    Negative real interest likely had an impact.

  11. Marcus Aurelius says:


    The chart, regardless whatever else might be right or wrong with it, seems to reflect the health of our economy over time. The implication being that we’re not on solid ground and haven’t been, for a while.

  12. constantnormal says:

    ummm … sighting along my outstretched arm+thumb, it appears to me that we might bubble on up to somewhere betwixt 115% and 125% of GDP before the next Minsky Moment arrives, and we take the plunge back toward reversion-to-the-mean territory, complete with overshoot on the downside (something we failed to achieve last time around — too big a step to take all at once, I suppose).

    That might put us possible bottoming around 40%-50% of GDP, in a time frame of somewhen between the summer of 2013 and the summer of 2015. And we still have some time spent in the upswing before that reversion arrives, peaking in the second half of 2012, just before the elections (whotta surprise!).

    Of course, that’s just my outstretched arm+thumb, and not any fancy chart lines or software. Nothing that anyone would bet money on.


  13. TheUnrepentantGunner says:

    I wonder what piece of the NASDAQ and (especially) the NYSE are global companies, who increasingly see a higher and higher share of their profits overseas…

  14. DeDude says:


    Yes when the economy is doing bad the market cap falls more than the GDP. But the argument being made is that current 103% cap to GDP means the market is over valued. That only holds if you presume that the % should be constant over all the years (the 62% line). I am questioning the basic premise of expecting a constant % (mostly because I don’t see why we should expect it to be constant).

  15. constantnormal says:

    It does boggle the mind a bit, for the market cap of the major US stocks to be greater than the GDP. I guess it all depends upon one’s perspective in the matter … if one thinks of stocks as the smaller part of our asset base (bonds and real estate (oops!) being a larger chunk of our asset base … then, unless the values of bonds+real estate have truly cratered, either stocks are WAAAY overvalued, or our economy is producing (the P in GDP) at a pretty anemic level (perhaps both). But if the economy is producing at an anemic rate, WTF is the stock market bubbling upward from? Can ALL the profits be phony fictions of fraudulent accounting? Or are we extracting profits by mining the substance of our economy, the credit lines of the sheeple, the wages of employees, etc — and NOT from making and selling things?

    I confess to not know the answer to this. We seem to be making plenty of consumer stuff, to the point that anyone who wants pretty much anything (iPods, HDTVs, jet skis, multiple cars, …) gets it, via the miracle of credit (maybe that’s on the decline now, but I’m not sure that saving will stick as the new normal without enforcement by a harsh Reality).

    But when you look back, the GDP seemed to be producing at a respectable clip from 1989-2007 (aside from that one small oops in 2001-2003), and the aggregate market caps were higher for most of that time than they are today, and we were not in (an obvious, anyway) state of froth from ’93 onward, were we?

    Color me puzzled.

  16. JamesR says:

    This web page provides similar info & is updated daily –

  17. constantnormal says:

    Maybe … maybe the lesson one should derive from all this is that market cap is a meaningless statistic.

    It certainly does not represent what one could purchase a company for, as the price it is based on is the result of a balance between buyers and sellers, and not representative of what it would cost to purchase all the shares of a company.

  18. ashpelham2 says:

    Please someone feed this troll and correct me if I’m wrong, but couldn’t the sheer number and ease of owning stock in public companies since the early 1990’2 have something to do with this? Before 1990 and the advent of internet trading, stock ownership, I would presume, was much more heavily concentrated to a smaller percentage of the population. Since that time, more individuals with less and less money can own smaller concentrations of equities. My theory here is that prices of equities have been driven up just by the sheer number of people who have very small positions in certain equities.

    Maybe I’m way off base. there’s a first time for everything :D.

  19. ashpelham2 says:

    And constantnormal, your first paragraph hits it on the head, methinks. So much of this profit growth has come from 1-lower payroll costs due to layoffs, rehires working for less, outsourcing; 2-higher prices that are too small to cause inflation but work in mass numbers to make higher profits and; 3-more debt being taken on, albeit by a smaller percentage of population with greater likelihood of repayment. In some ways, it’s business as usual, in others, it’s robbing from Peter to pay Paul.

  20. constantnormal says:


    That link would imply that the stock market was “fairly valued” at the peak of the 1929 stock market bubble, when the market cap of stocks was about 90% of GDP.

    I’m not so sure that we should be placing overly much weight on the use of market cap as a measure of anything.

    It’s a one-number valuation of a thing that has more dimensions than I can enumerate. It tells you nothing of yield, growth prospects, indebtedness, productivity, the fraction of the corporate world that is represented by publicly-traded stocks, etc. Of course, GDP falls pretty much into the same camp.

    What does the ratio of Reynolds number to Brinkman number tell us? (see http://en.wikipedia.org/wiki/Dimensionless_quantity for an explanation of these terms). I’ll bet one could make some spiffy charts of ratios of all kinds of things, and have them mean not terribly much.

    It does make a jim-dandy chart, tho’.

  21. abelinsky says:

    What a chart like this fails to take into account is how much of the economy has shifted from privately held to public traded in the last 20-30 years (think roll-ups and category killers). Two quick examples: Mom & Pop stationary stores all replaced by OfficeMax, Vets bought out and rolled up by VCA Antech.

    The point is that the Market Cap number represent a bigger piece of the economy than it used to, so historical conparisons are not strictly valid.

  22. Niskyboy says:

    Wow — there sure is a lot of money sloshing around the world. Too bad its value is so inflated.

  23. The Curmudgeon says:

    Comparing stock market capitalization to GDP to ascertain where stocks might head from here is roughly akin to tracking the price of goat’s milk in the ‘stans to see whether the stock market is going up or down. There may be correlation, sometimes, accidentally, but there is only an attentuated level of causation. Market cap is a measure of wealth, or, if you prefer, money, and where it happens to be parked at the time. GDP is a measure of activity. In that regard, I think much of the divergence of the two from the nineties on represents 1) a deflation in money prices (i.e., a gradual, halting decline over the last two decades in interest rates, culminating in zero for short-term money); and 2) as ashpehlam2 observes, the increased liquidity of stocks as money substitutes due to technical innovations allowing their nearly cost-free buying and selling. Except to indirectly show that stocks are more valued as money substitutes now because of their enhanced liquidity, I don’t think the relationship between market cap and GDP is otherwise all that relevant, and I certainly wouldn’t use the metric to determine whether stocks are now over- or under-valued.

  24. constantnormal says:

    @ashpelham2 2:14 pm

    Yup. Also, the rise of IRA, 401K,s and HELs. Those all arrived in the mid-70s to mid-80s. And as the boomers approach retirement, their contributions toward some meager retirement portfolios would tend to skyrocket, especially as they become increasingly aware of the lack of certainty in maintaining employment once they get past 50. A lotta reasons for money to pile into stocks over that interval, especially with “stocks for the long run” being thrown at people from virtually the entire financial establishment (when they were not being urged to buy another house).

    None of that is apparent from a simple ratio of market cap to GDP.

    In thinking about what — given all my qualms about this chart — I would like better, it comes to be that an area-under-the-curve chart based on the Feds Flow of Funds reports from the beginning of record-keeping through today might be nice, in the form of 2 charts: one showing where money/value was residing (real estate, bonds, stocks, “stuff”), and the other showing where the production in GDP was coming from (by industry, perhaps). That might be more useful — although still pretty limiting in attempting to assess something as complex as a national economy on a single page.

  25. boratsagdiyev says:

    In a capitalistic society, more and more companies go public.

  26. MichaelGat says:

    Hmmm, off the top of my head I can think of half a dozen companies in the NYSE Nasdaq that are not US-based. They’re not ADRs, they are just companies that trade directly on our exchanges.

    BIDU, TEVA, CHKP, IFX, HBC, TTM, I could go on.

    Bottom line to me is that a significant percentage of the value of the NYSE and Nasdaq is non-domestic companies, most of which are not trading as ADRs. That’s not counting a large number of nominally domestic companies that operate mostly overseas. Globalization of the markets has made this chart less useful since the 80s than it may have been before, but probably does not completely negate the extreme changes in trend over time.

  27. Dow says:

    ~In a capitalistic society, more and more companies go public.~

    That’s a clever way to say ‘socialized losses’.

  28. cognos says:

    I hear GOOG and AAPL are solely dependent on US GDP.

    For all the good reasons cited above — this is a completely meaningless stat. (Oh, and it hasnt been at all helpful for 30 years… why would it be today?).

  29. David Merkel says:

    Using Q and CAPE we are overvalued:


    Profit margins are very high:


    The one positive thing I can say is stocks are cheap relative to corporate bonds, and offer more of an inflation hedge. The problem is, what if we get deflation? Many expected inflation in the ’30s and it never came.

  30. adeev says:

    “it essentially argues the case that US markets have been over valued since around 1990″

    This is a really dumb thing to say. What about the ratio of public and private companies? One could say that today we have more public companies than 30 years ago, therefore, their total market cap must be larger.

  31. dead hobo says:


    Assume an economy where the number of stocks is fixed and the GDP is fluid. Assume a disproportionate amount of cash goes into those stocks and you have NOTHING THAT IS EVEN SIMILAR TO THIS CHART even though the implication says BIG ASS BUBBLE!

    Above, for your personal review, please see a chart that has the NYSE for the first part and THE SUM OF the NYSE and NASDAQ for the last part. The denominator is the same throughout. Thus, the numerator, BY DESIGN, increases a shitload squared in the middle by adding something intended to make the chart rise by A SHITLOAD. You end up with something designed to appeal to those predisposed to thinking BUBBLE BUBBLE BUBBLE … (buy this shit now while nobody else knows about it!!!)

    Seriously, the amount of cash added to the numerator increases at the same time as the bubble effect.

    All this means is that more cash entered the market due to more investment opportunities. The rest is noise not explained by this chart.

  32. msaroff says:

    Gee, the big jump sems to correspond to when indirect subsidies of the stock market (401K & IRA) became popular.

  33. dead hobo says:


    Do you really believe this stuff or are you just having fun passing appreciated softballs in my direction? Maybe you shouldn’t answer and spoil all the fun. Double strength and non-revocable ATTABOYS to all who question the appearance of useful information.

  34. DL says:

    It seems to me that the national debt may play a role here…. no doubt some of all that borrowed money wound up in the stock market, or in corporate earnings.

  35. constantnormal says:

    Perhaps this spike is indicative of — like the securitization of mortgages, multiplying the money manyfold — the securitization of Bananamerica.

    I think I’m going to incorporate myself and securitize “me” (via IPO). (is there a ticker for “me”? Damn! Mariner Energy beat me to “me”)

    Just think of the advantages — as a corporation, I’d have enormously more clout on Capitol Hill, MUCH more than an ordinary voter, and a whole lot more tax breaks. Heck, I could even hire some congressfool to write my own personal loopholes into the tax code. And if I were incorporated as a financial industry participant (I understand it takes little ability to operate there — for a while, at least) I might well be able to borrow money ZIRP-style to pay off my lackeys in goobermint.

    I think this is the Wave of the Future. Maybe I’ll franchise the operation.

  36. cheese says:

    Does this include ADRs?

    China Life, Rio Tinto……..etc….all are listed on the NYSE as well. Furthermore…….a stock like RIG isn’t HQ’d in the U.S. anymore, but isn’t listed on another exchange – as far as I know anyway – is it included in the capitalization figure as well?

    Without knowing what is included as far as “capitalization” goes……this chart, while pretty, is meaningless.

  37. TakBak04 says:

    Yah! Many of us who’ve been around awhile know it’s all over-valued. But, how can you fight the Tape…or Bernanke or the Black Boxes?

    It grinds upwards. Those of you who TRADE can do something with this with some options and such.

    But…what are the rest of us supposed to do?

    That’s the problem. It’s “FIXED” in they eyes of many of us who have money..but minimal flexibility. When will anyone understand that…or are we the “last to board that train?” (Not Traders and sacked our Investment Manager who failed us on the latest implosion….so we are here…in CASH…but too worried to come in.) Is this just some last attempt to get us to come in there and then TAKE IT ALL AGAIN?

    That’s the worry….. So…we sit on sidelines and watch the Clown Show…and wait for the Circus to Move out of Town?

  38. SCTTD says:

    Why do i think of ‘Triple Waterfall’ when I look at this chart?

  39. santamonica says:

    The arguments regarding public v private do affect the ratio. This would be offset partly by the growing foreign sales of US companies. US listing of foreign co’s would also move the %age. But from a very macro perspective, the ration is still quite relevant.

    Market cap can exceed GDP, as market cap is just the expected present value of the profits in the GDP number (which someone correctly commented that are accruing to capital more than to labor in the more recent decades – versus the union era).

    I’d be interested in hearing any comments on the enterprise value issue from my earlier post.

  40. Deborah says:

    When I started serious investing, well trading would be more accurate, I looked at the ascent into insanity of the valuations over and over trying to get my mind around how that could have happened.

    I worked in the banking industry in the early 80s, developed investing beliefs, and then I did not really look too much at investments for about 20 years and have referred to the change as the Rip Van Winkle effect, it was like you look again and the entire investment world had changed.

  41. cognos says:

    It’s NOT — “all over valued”.

    Companies go private, and get bought for 50% premiums every week. Hmm?

    Companies pay 2-3% dividends, have large cash balances, and continue to grow earnings. MSFT has paid close to $100B in dividends.

    Earnings drive stock prices and the “earnings yield” or “cash flow yield” relates well with the prevailing other alternatives — interest rates, corporate credit spreads. Notice these rates have come down enormously since 1980. One MUST factor this into any analysis.

    While it can be helpful to look at history… more than 20-30 years of history really starts to compare very different financial animals. Transparency, liquidity, transaction costs, diversification — ALL of these were very different even 20 years ago than they are today. Please do not compare an electronic stock investing account that trades in $0.01, on my computer screen, for 25%/yr. More participants may lower the “average” from 15% to 8% or even less over time. But this wont change the mark on “good”.

    Oh, and a 50/50 SPX index fund and PIMCO total return fund has steady done very well for the average mom and pop. Its 5-15% annual depending on when you started investing. At most it drew down maybe 15% in the crisis.