The US stocks are considerably dominant worldwide despite the country experiencing multiple economic turmoils over the years, including the 2008 financial crisis and the coronavirus pandemic-induced economic crisis.
Data acquired from the markets show that the US, as of January 2021, controls over half of the relative size of the global market at about 55.9%. This dominance by the United States markets stands out when compared to second-placed Japan that controls about 7.4%. Despite China arising as a major global economic powerhouse, it accounts for only 5.4% of the global cumulative equity market value.
In comparison to these figures, the United Kingdom comes in fourth with a share of just 4.1%. Furthermore, the United States’ extensive capital market value is seen in the top ten stock exchanges list based on total market capitalization. On top is the New York Stock Exchange controlling a market capitalization of $25.62 trillion.
Nasdaq-US comes in second with a market capitalization of $19.51 trillion. The Hong Kong Exchange and Clearing come a distant third with a market capitalization of $6.76 trillion. The Shanghai Stock Exchange is China’s top entry on this titan’s list with a capitalization of $6.55 trillion as of February 2021.
Why The US Stocks Are Dominant
The share by the US stock exchanges represents the country’s economic performance, huge IPO returns alongside considerable profits stocks. Considering this vast difference, it is clear that no other market can rival the US currently.
Also, this dominance by the United States arises from the fact that the leading firms worldwide are listed in the country. Interestingly, American firms like Tesla, Amazon, Apple, and Microsoft cumulatively control high valuations that run into several trillions of dollars. The firms also experience rapid profit growth which is a notable reinvestment at higher rates.
The contribution of these firms to the US share in the stock market is also mentioned in various research studies. It was discovered that the top 500 US public companies’ market value grew by $1.99 trillion between December 31, 2021, and March 31, 2021; surging from $33.38 trillion to $35,38 trillion.
The value additionally was majorly contributed by the tech industry that offered tools for navigating the COVID-19 pandemic, particularly with entertainment and working mostly from home. Moreover, the United States stock market provides access to the best financing and capital for the firms that trade there.
This factor explains why the leading foreign firms are listed in the United States. Even though countries like China are already making advances to attract large foreign firms to list with the local stock market, the United States remains an attractive destination for cross-border listing. Hence, the US stock exchanges attract a huge volume of firms directly contributing to the share.
Additionally, listing in the United States for the foreign firms has a reputation of attracting cheaper cost of capital, huge shareholder base, greater liquidity alongside prestige. The United States capital markets also have a majorly defined and straightforward regulatory infrastructure compared to the other big economies like China.
In general, trading in US-based exchanges appears to eliminate some of the investor worries. Before listing, all foreign firms need to comply with Securities and Exchanges Commission guidelines that offer a highly transparent process. Unlike the regions like China, a majority of the companies seem to be skeptical as a result of lots of uncertainty and excessive control from the state.
US Stock Market Benefit From Major Establishment
The American position shows that the nation’s stock market has a major foundation. The share is still considerable even with the region experiencing one of the worst effects of the pandemic.
Despite the US grappling with Covid-19’s economic impact, China resumed normal operations, presenting an ideal chance to eat in the US share. Nevertheless, the United States has established itself as the universe of the global home of the stock exchange.
Based on the American dominance of the stock market, it is now clear that no country is posing a formidable challenge. For the other markets to catch up, they have to be innovative and offer a conducive environment that will attract high valuation foreign firms. Concurrently, they need an environment that retains local firms.