Value of the stock exchanges over GDP
In December 2001, Warren Buffett, the mythical investor and the fourth richest man in the world, said in a Fortune interview that the stock market capitalization of global GDP is “possibly the best Measure where valuations are at any time. “
The Omaha Oracle made these statements two years after this ratio reached its all-time high above its 90% mark in 1999, which, in the words of the tycoon, “should have been a very strong warning signal.” And the danger was a near fall of almost 50% in the US market in 2000 after the dot-com bubble burst.
The entire world economy would not be enough to buy the international stock markets. Global equity capitalization is already at record levels and exceeds the value of world GDP for the first time since 2007.
The figures leave no room for doubts about the good moment in the world stock markets. The joint valuation of all the stock exchanges in the world has surpassed this week the barrier of 76 trillion dollars for the first time in history. In just eight months, global equities have gained more than $ 10 trillion in capitalization, given the widespread recovery of international stock markets.
During this escalation, triggered initially by the expectations generated by Donald Trump’s arrival to the US presidency, the US S & P 500 has recorded more than 14%, the eurozone EuroStoxx 50 has risen by 16.68% and the Japanese Topix goes back about 20%. The Ibex has not been an exception in this bullish feast and has accumulated a revaluation of 19.2% since last November 8.
Thus, the total valuation of global stock markets was at the end of this Thursday at 76.28 trillion dollars, a figure that exceeds the world GDP, which at the end of 2016 was 75.64 trillion dollars, According to the World Bank. This is the first time that stock market capitalization has surpassed the value of the global economy since 2007, before the outbreak of the financial crisis.
This does not mean that the world’s stock markets are going to suffer a great fall, more in these times of growth of the economy, but yes that certain bags can undergo a certain correction, USA for example.