Too many investors have become fixated on stock demand growth due to global central bank liquidity injections, record high investor sentiment and (thanks to the sugar high of Trump Tax reductions) improving US economic data. No doubt all have been important. However, it has become increasingly critical to properly assess shrinking stock supply to know both why the stock market may still continues rising in the face of quantitative tightening and what consequentially might trigger an equity market reversal. The three major US stock market “pools” are all shrinking in a dramatic and stealth fashion.
Too Many Investors Trying to Get Into the Shrinking Stock Pool
1- SHRINKING POOL OF # PUBLIC LISTED COMPANIES
Stock markets have in recent years been shrinking by listings (but not by market cap). According to data from the Center for Research in Security Prices at the University of Chicago Booth School of Business in 1996, there were actually 8,023 public listed US corporations. This has been reduced to 3,627 by 2016 or a 55 reduction%.
Going back 40 years to 1976 (prior to the dotcom explosion in IPOs which occurred in the 90’s) the US had 4943 public listings. This is still a 27% reduction in publicly listed firms over a 40 year period. Meanwhile the population of the United States has grown nearly 50 percent since 1976, the drop is even starker on a per-capita basis where there were 23 publicly listed companies for every million people in 1975, but only 11 in 2016,
