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We should now be asking deeper questions than simply whether and when the stock market bubble will burst. We need to reconsider the role of the private and public sectors in allocating financial resources to the global economy. Failure to do so could lead to significant increases in tax rates around the world, as governments will be burdened with the responsibility of raising funds that the private sector, particularly equity investors, have long avoided.
As of early 2022, there are over 58,000 companies listed on stock exchanges around the world. Even with such a large number, there are vast areas of economic activity and social needs that it does not encompass.
The Magnificent Seven and Granola represent a small percentage of all publicly traded stocks in the world. But in value terms, seven companies — Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla — account for more than $13 trillion, or a staggering 28 percent of the S&P 500’s total value.
Granola – GSK, Roche, ASML, Nestlé, Novartis, Novo Nordisk, L’Oreal, LVMH, AstraZeneca, SAP, Sanofi – has a modest valuation of around USD 3 trillion. However, it still accounts for 25% of the Stoxx Europe 600 index’s market capitalization.
Importantly, these US and European giants absorb a disproportionate amount of global savings and stock market liquidity, and the current market euphoria could threaten the fate of just 18 stocks. It’s not just that they are dependent on each other. That’s because our collective savings, whether invested through pension funds, mutual funds, insurance companies, or other vehicles, can be invested in narrow tech stocks or This means that we are concentrating on consumer stocks.
For example, we know that more than US$100 trillion will be needed to fight climate change in the coming decades, that trillions of dollars will be needed to improve infrastructure deficiencies, or that health needs will require more than $100 trillion to fight climate change in the coming decades. Consider that you need more funds. A stock market culture obsessed with technology and consumption rather than a broader range of investments, funding a narrow range of assets, will only cycle through booms and busts.
The irony is that while fund managers are always looking for alternatives to stocks and bonds, socio-economic alternatives are already on their doorstep. We need to work with multilateral institutions such as the World Bank to package such investments in a way that makes them accessible to equity investors.
A vast wealth management industry has grown in Western countries and other market economies. According to Boston Consulting Group, the amount of global financial assets under management has increased to US$98 trillion by 2022.
Hong Kong’s star shines with the Greater Bay Area’s rich water tax incentives and incentives
Hong Kong’s star shines with the Greater Bay Area’s rich water tax incentives and incentives
Unless we all become more aware of our broader social obligations and accept that our savings need to be directed towards meeting these needs, our tax bills are likely to increase dramatically. In other words, the world needs to take a more holistic view of funding. what and how.
Anthony Rowley is a veteran journalist specializing in economic and financial issues in Asia.
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