From our GFD Insights Blog

Listing all items tagged with: Economics

• Another Sign of an Overvalued Market?

  The United States stock market has broken to new highs in January 2020, continuing a bull market that began in March 2009.  The S&P 500 has risen 382% since March 2009 and is approaching the record bull market of 1974-1987 in which the S&P 500 rose 442%.  This would be only the fourth time that an American bull market rose by more than 400% if this bull market continues. As Figure 1 shows, US stock market Capitalization is close to the same levels as in 1999 when the Internet Bubble burst.  By our estimate, when the S&P 500 hits 3650, the stock market’s capitalization will be twice GDP.

• Could the American Stock Market’s Capitalization Soon be Twice GDP?

  The Great Bull Market of 2009 to 2019 continues to push the stock market to new highs.  The capitalization of the New York Stock Exchange and NASDAQ is now about $37.5 trillion which is equal to 174% of America’s Gross Domestic Product. If the market continues to rise, the American stock market will soon have its largest Market Capitalization/GDP Ratio (MCap/GDP) in history.

  The American stock market first exceeded 100% of GDP in September 1929 before it crashed to its 1932 lows at less than 25% of GDP. The stock market’s capitalization didn’t exceed GDP again until 1996.  The Dot.com Bubble of the late 1990s pushed the

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• Global Financial Data’s Emerging Market Indices

  Global financial Data has calculated an index for Emerging Markets that far precedes any indices that are currently available. MSCI’s emerging market index begins in 1987. GFD’s Emerging Market Index begins in 1602. Though few people may realize it, emerging markets are one of the primary reasons why stock markets came into existence 400 years ago.

• Global Financial Data’s Market Tops and Bottoms Indicator

  Global Financial Data tracks bull and bear markets in over 100 stock markets.  We have calculated when bull and bear markets have begun and ended throughout the world beginning in 1602. We have over 100 years of data to analyze when bull and bear markets have begun and the number of market tops and bottoms that have occurred each year. GFD defines a bear market as a 20% decline in the primary market index for each country and a bull market as a 50% increase in the primary market index.  A market top occurs when the index declines by 20% or more after a 50% increase, and a market bottom occurs when the market rises by 50%

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• Government Bond Yields and Returns in the 2020s

  The 2020s have begun.  During the 2010s, the fixed-income market has done things no one would have predicted when the 2010s began ten years ago.  The most important feature of the past decade has been the steady decline in government bond yields, falling to negative nominal yields in most of Europe and negative real yields in the United States and Canada.

  Government bond yields have been declining since 1981 throughout the world.  In the United States, the 10-year bond yield was 3.85% at the end of 2009, but has declined to under 1.90% today.  The yield on 10-year government bonds in Japan has declined from 1.30% in 2009 to

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• Paul Volcker, the Man Who Changed the Equity Risk Premium

  On December 9, Paul Volcker, who served as Chairman of the Federal Reserve Bank from 1979 to 1987, died at the age of 92.  Paul Volcker changed the shape of the economy and of financial markets.

   

  The Rise and Fall of Interest Rates

  Paul Volcker is known for two things.  He instituted the Volcker Rule as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. This prohibited banks from conducting some investment activities with their own accounts and limited their dealings with hedge funds and private equity funds.

   

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• The Market’s Thirty-Year Cycle Continues
• The Spanish Flu and the Stock Market: The Pandemic of 1919

  Everyone is concerned about the coronavirus and how it is impacting the global economy.  Parts of China have been quarantined to prevent the spread of the virus and the world is wondering how the virus will disrupt supply chains between China and the rest of the world and how it will impact global travel. Will cities that are cut off from the rest of the world be able to contribute to the global economy?

  The main precedent for the coronavirus is the SARS epidemic of 2002-2004, but you should also look at the more serious Spanish Flu pandemic of 1919.  It is estimated that the Spanish Flu infected 500 million people

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