In most of the obvious ways, the stock market is closing out a very big year: The broad indexes are up more than 20% to reach new all-time highs, and the value of U.S. stocks has scarcely ever been greater relative to the size of the economy.
Yet in a few subtle but telling respects, the stock market is shrinking.
There are fewer publicly traded companies on American exchanges than at any time since at least 1990. A larger proportion of this narrower market falls into the “small-stock” category. And established companies have been aggressively pulling their shares off the market through buybacks.
Together, this amounts to a restricted supply of equities. To exaggerate slightly, there might not quite be “enough stock to go around” to meet a slowly rising level of investor demand. No doubt, this is at least a factor for the steady lift in share prices.
A steep downtrend
The total number of U.S. exchange-listed companies peaked near 8,800 in 1997 and has since sunk to 4,900 as of year-endRead More »from The Stock Market Is 'Shrinking,' Despite Record-High Indexes