US Stock Markets Valuations Exceed 40% of World Total.
According to website Seeking Alpha, the valuation of the United States stock markets exceeds 40% of the entire world (https://seekingalpha.com/article/4202768-u-s-percent-world-stock-market-cap-tops-40-percent). They compared that to the market capitalizations as they stood on the recent election day in 2018.
Not surprisingly, the United States share of world equity value has increased from 36.5% since the last presidential election in 2016. The “Big” loser has been China which has dropped from 10.2% to 7.5%. Japan’s stock market has surpassed China in value to become number 2.
The United States has been the top destination for investment dollars internationally for years. The disparity between domestic and international equity returns has been unprecedented. Just ten years ago, US markets accounted for less than 1/3 of the world’s equity value at 32.3%.
Largest World Stock Exchanges by Total Market Capitalization.
Reported market values by exchange seem to vary somewhat by source. They also change daily, so finding a true apples-to-apples comparison is a bit trickier than one might think.
Nevertheless, the top exchanges, along with their respective market capitalizations are roughly as follows: NYSE $25 Trillion, Nasdaq $14 Trillion, Japan $6 Trillion, China $5 Trillion, Germany $4 Trillion, Hong Kong $4 Trillion, London $4 Trillion, Euronext $4 Trillion, and India $4 Trillion.
There are 19 stock exchanges worth $1 Trillion or more and roughly 60 in total.
The above numbers are approximate. The sources of data are: (https://www.cnbc.com/2018/08/03/china-loses-status-as-worlds-second-largest-stock-market-to-japan.html), (https://www.statista.com/statistics/270126/largest-stock-exchange-operators-by-market-capitalization-of-listed-companies/) , and(https://en.wikipedia.org/wiki/List_of_stock_exchanges).
Other Stock Exchanges Offer a Glimpse into Economic Health.
While foreign exchanges are most useful in assessing that country’s prospects, they are also valuable in assessing ours. The United States engages in $5.7 Trillion in two-way trade with the rest of the world. Currently, imports run at $3.2 Trillion and exports at $2.5 Trillion per year. Our GDP is reported to be $20.6 Trillion (http://www.usdebtclock.org/).
If one looks at our two-way trade, it represents a whopping 28% of GDP. Trade wars aside, the economic health of our major trading partners is an important factor in our own prosperity (http://www.usdebtclock.org/).
Another VERY important reason is the world banking system is so interconnected. If a major partner has a financial crisis, it has the potential to cross borders and create financial damage here.
Presented below are the charts of the largest world exchanges and our trading partners. They are not just hinting at coming problems. They appear to be screaming.
Most World Markets Already in Bear Territory.
The slideshow below has EIGHT of the largest and most indicative world markets and indexes. Not one of the 8 is BULLISH and only 2, India’s NIFTY FIFTY and Japan’s N225, have yet to enter “official” BEAR MARKET territory. Their patterns are similar to the Dow Jones Industrials, Standard & Poor’s 500, and Nasdaq 100: “Stock Markets Bracing For Recession” https://markonomics101.com/2018/11/21/stock-markets-bracing-for-recession/.
For our purposes, a break below major support produces a lower low thus constituting a downtrend and BEAR MARKET.
Can the US markets possible rally against the backdrop of falling world exchanges?
It is also ominous that the world markets have nearly identical patterns. All have either broken down or are close to doing so.
“Rounded Domes” or “Head and Shoulders Patterns” are fairly reliable reversal formations. Keep in mind, though, nothing is ever 100% in the markets.
Still, how can the United States not be affected by what appears to be a world slowdown? What other than a world slowdown could send the price of Crude Oil down to $50 from $77 in just a few weeks?
Four Horsemen of the Nasdaq Collapse Go from Downside Trot to Gallop.
Not only do the World Markets SCREAM Caution, so do our most popular and beloved stocks.
The “Four Horsemen of the Nasdaq Apocalypse” (https://markonomics101.com/2018/08/23/tipping-point-part-2-the-four-horsemen-of-the-nasdaq-collapse/) are the technology behemoths whose market capitalizations recently approached $1 Trillion each. Both Apple (AAPL) and Amazon (AMZN) briefly did exceed $ 1 Trillion and the Horsemen approached a combined $4 Trillion.
For much of last summer, just the “Four Horsemen” were worth more than all but a handful of the entire world’s STOCK EXCHANGES.
The Horsemen led the way up and are now leading the way down. The slideshow below illustrates just how far these companies have fallen and how quickly. AAPL has lost more than $300 Billion in market cap since its high. It has lost more than 25% in less than 2 months. Amazon has lost 25% in 2 months.
If the Dow (currently at 24,200) lost 25% from its recent high of 27,000, that would suggest a drop to 20,250. That level of decline would place it square into “Bear Market” territory.
Apple’s chart, along with those of the other Horsemen, shows just how risky this juncture in the market is.
This type of price behavior, especially when considered along with the world markets, suggests the increasingly likelihood that a “Waterfall Decline” may be imminent.
Pessimism is Surprisingly Low.
During 2018, the Dow has bounced off the 23,500 to 24,000 range at least 8 times. During those occasions, there certainly seemed to be a temporary, but high sense of fear. But this time seems different, especially in light of the Dow close of 24,200.
The American Association of Individual Investors regularly publishes a sentiment survey and their latest was surprisingly complacent (http://blog.aaii.com/aaii-survey-biggest-takeaways-from-octobers-spooky-ride/).
Directly from their website:
“The biggest block of voters–40%–say that down months such as October are the price investors must pay to reap the long-term rewards the stock market offers.
Another 22% of our readers say that the reason why they have an investment plan is to be able to ride out months like October.
In a close third place, 21% of respondents say that the market decline that took place in October was part of a normal bull market and that the overall uptrend is still intact.
Eight percent of readers say the biggest takeaway from October is that it’s time to buy the dip.
On a more pessimistic note, 5% of readers say it is time to rethink their investment strategy and 3% believe the bull market is over.”
Only 5% of the respondents to the survey are worried about a BEAR MARKET. For those of you who may not understand why such low pessimism is a bad sign, a little brushing up on market psychology might help: “The Psychology of Investing” (https://markonomics101.com/2018/10/08/the-psychology-of-investing/).
The signs continue to be very ominous and we hope that investors and traders will exercise the utmost in caution.
Your best weapon in the markets is to “Be Informed, Not Misled”.
Or, better yet Stay Informed by joining our free subscription list!