My pal Matt Krantz at USA Today documents the vanishing stock market. He notes that there now are 3,678 companies in the Wilshire 5000 index, down by more than a third in a decade and off by nearly half from its level in 2000. And this stunner: “At 3,678, the number of companies available for the public to invest in is much closer to the low of 3,069 in February 1971 than to the high of 7,562 in July 1998.”
Among the reasons Krantz mentions are heightened M&A activity, a quiescent IPO market, and moribund public interest — leading to low valuations that nudge public companies to go private. About that last point, Krantz blames Bernie Madoff and the 2010 Flash Crash. Another factor could be a flat market throughout the 2000s, a down market if you factor inflation.
We should want a broad, thriving stock market where Americans can earn capital income, in addition to labor income. I have written previously about stock market reform. And one way to make more equity available, notes economist Noah Smith, is by “reforming regulations like Sarbanes-Oxley that make it risky and difficult to go public.”