BREAKDOWN: US Stock Market Cap to GDP Reaches 190%, Eclipsing Dot-Com Bubble High
CoinDesk Podcast Network
CoinDesk
4.8 • 689 Ratings
🗓️ 31 August 2020
⏱️ 11 minutes
🧾️ Download transcript
Summary
The booming stock market is driven by perception of the Federal Reserve’s commitment to high prices and growing individual trading, but how sustainable is it?
This episode is sponsored by Crypto.com, Bitstamp and Nexo.io.
Today’s episode of The Breakdown looks at the stories the stock market is trying to tell, including:
- New all-time high in total market capitalization to GDP ratio (higher than dot-com bubble)
- “No precedent for how high” valuations can go
- Fed denies asset bubble; intimates it wouldn’t care about asset bubbles if full unemployment comes with them
- Bezos at $200,000,000,000
- Percentage of stocks traded by individuals reaches all time high of 20%
- Robinhood leads in FTX complaints
- Buffett’s Japan trading firm bet
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Transcript
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| 0:00.0 | Now, some of you smart math folks may be saying to yourself, well, it's probably more about |
| 0:05.4 | the GDP cratering in the context of COVID-19 than it is about somehow the stock market going |
| 0:12.4 | up so much more. |
| 0:13.8 | The problem with that is that using pre-pandemic GDP, the ratio is still 170%, an all-time |
| 0:20.4 | high, higher than that March 2000.com bubble peak. |
| 0:25.1 | Welcome back to The Breakdown with me, NLW. |
| 0:29.2 | It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. |
| 0:35.0 | The breakdown is sponsored by crypto.com, Bitstamp, and nexo.io, and produced and |
| 0:40.9 | distributed by CoinDess. What's going on, guys? It is Monday, August 31st, and today's episode is |
| 0:50.1 | sort of a super brief, where I'm going to share a lot of numbers and a lot of stories, |
| 1:00.5 | just even more briefly than usual. And the common theme is the stories the stock markets are telling us right now. And I thought that this was a good time for this episode, given that we're |
| 1:05.2 | in that classic transition from summer to fall, trying to wrap our heads around everything |
| 1:09.5 | going on, looking, I think, |
| 1:11.2 | uneasily at what's going to happen with the markets as we go into this election season. So |
| 1:16.8 | it should be a pretty interesting way to try to get a sense of just what's out there and what's |
| 1:21.5 | happening. Let's start with the number that this episode was named for. Sven Henrik, who's Northman trader on Twitter, tweeted out a chart this morning |
| 1:31.0 | showing that the market cap to GDP ratio has reached 184.7%. |
| 1:36.7 | That is the ratio of the total market capitalization of U.S. companies to the total GDP. |
| 1:47.9 | That 184.7% number compares to around 130% at the start of the year. According to a different tweet from Liz Ann Saunders, who's the |
| 1:54.6 | chief investment strategist at Charles Schwab, it's actually 190%, with the total market cap of all U.S. stocks hovering just under 37 trillion. |
| 2:05.7 | The previous high of 167% was in March of 2000, which was obviously at the peak of the dot-com |
| 2:13.8 | bubble, so a precedent that isn't really great. Some of you smart math folks may be saying |
... |
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