Chartology: April 2019

In this month’s edition of “Chartology”, Director of Investment Research Chris Maxey discusses the change since 1980 in the number of publicly listed companies in the United States.

April 2019 Chartology from Bronfman Rothschild on Vimeo.

In this edition of Chartology we discuss a topic that we think is rather interesting, but not that well understood or covered. What you’re looking at is the number of publicly listed companies inside the United States, going back to 1980, and then extending through 2017. Notice that from 1980 through about 1996, the growth in the U.S. was relatively steady, which means that there were more public companies each and every year, almost.

But what we saw happen was that in 1996, that number peaked, and it began to decline rather rapidly. So in 1996, there were just under 8,100 publicly listed companies in the U.S. and by 2017, that number had come down to 4,336. That is interesting for two reasons. One is that the U.S. economy has been growing relatively strongly over the duration of this period, but secondarily, equity markets in the U.S. have also grown. They’ve expanded from about $8 trillion in 1996, to over $32 trillion by the end of 2017.

If we start to think about what’s going on, we’ll move on to talk about not only the U.S., but what’s happening in the rest of the world, and what the implications are for investors. Up at the top, the orange lines again show the number of publicly listed companies inside the United States. At the bottom is the rest of the world, which has been growing, and started to accelerate its growth in the early 1990s. In 1996, there were about 28,000 companies listed overseas, and by 2017, that number had grown to over 38,000. If we think about the market cap, we’re just talking about the growth in the U.S. market cap from eight and a half to $32 trillion, but for the rest of the world, that market cap grew from $19.6 trillion to over $79 trillion.

Now, what does this mean? A couple of things – one is that we believe there are an increased number of opportunities overseas for investors that are willing to go there. As you might imagine, covering that number of companies internationally is quite difficult, so if you have the acumen and the ability to invest in those companies, that’s a very attractive opportunity.

It’s also worth noting that as we look inside the U.S., more and more of those companies are beginning to derive revenue from overseas sources. As we think about building portfolios, we have to take into account the revenue that’s being generated internationally from U.S. companies, but also how that complements what companies in the rest of the world are doing. We hope you found this interesting and if you have any questions, please follow up with your advisor. Thank you.