The Long Term Growth of the US Market

One of the interesting data sets the Fed Flow of Funds Report provides is the total market value of publicly traded equities on the US market. Year End 2005 data available on-line indicates the value was $18.2 trillion.

In 1980, a quarter century prior, it was only $1.5T, an increase of $16.7T. A pretty good quarter-century of wealth creation for stockholders! In other words, 91.8% of the stock market values was ‘created’ in the last 25-years.

Below are two charts, both representing the value of U.S. stocks from the end of World War II in 1945 to the end of last year. In 1945 the entire US stock market was valued at $117 million ($282m in 1955; $735m in 1965; but only $632m in 1974!).

Note: The y-axis (left side ofchart) on a linear chart is scaled to represent the same dollar value increase regardless of the valuation level; the log chart is scaled so that the same percentage increase moves up the same level on the chart regardless of the valuation level. Log charts should be used when values are viewed over more than a few years. Expressing numbers as a logarithm scales them to allow comparison of their difference over time…$100 to $1000 (1949-1969 approx above) is same as 1000 to 10,000 about 20 years later.