Stock market Capitalisation as a percentage of GDP
This indicator can be a useful guide to market valuation over the long term. (Especially in
the business cycle sense) As would be expected, Australia's stock market capitalisation as a
percentage of our GDP has been rising this decade. You can see where the money has been
flowing. We hope to develop these statistics for Australia back further still but they're
hard to find currently.
For the first time ever, Australian stocks are very close to selling for a net worth
approaching the nation's own economic output.
For the US stock market we have posted a copy of Ned Davis Research extracted from the book;
"The Bear Book" - John Rothchild, Wiley & Sons, New York, p 68.
It is only since 1997 that US stocks, for the first time ever, have sold for greater than US
economic output. Currently the US stock market capitalisation as a percentage of GDP has
risen to above 150%. New paradigm or extreme over valuation? A case for the bears here.