The stock market outperforms the real economy in 11 countries compared to seven in 2019

The coronavirus pandemic has accelerated global financialization due to the inevitable contraction in activity, on the one hand, and, on the other hand, due to the extraordinary fiscal incentives of governments and central banks that avoided a liquidity and debt shock similar to that of the Great Financial Crisis, despite the severe recession in 2020, and that have sought to promote a rapid recovery since this year.

One of the consequences of this heterodox response at the end of 2021, and taking the IMF’s growth forecasts as a reference, is that the stock market outperforms the real economy in 11 countries, compared to the 7 in which this ratio of the capitalization of listed companies to real GDP reached or exceeded 100% in 2019. To Switzerland, the US, Sweden, Japan, Canada, the United Kingdom and the Netherlands before the Covid Australia, India, France and South Korea have joined.

The large expansive policy packages, the public protection of employment at the cost of cheap debt ?? with interest rates at historic lows ?? or, precisely, the programs of debt purchase emergency, which have fattened the balance sheets of the Federal Reserve (Fed) or the European Central Bank (ECB) to unprecedented levels, have diverted large amounts of money to the stock markets, increasing the securitization world.

At the extreme, the ratio of the capitalization of listed companies to GDP exceeds 300% in Switzerland, the 290% in the US and 250% in Sweden, among the large markets. For Alfredo del Río Casasola, professor of World Economics at the Complutense University, this process responds to “the creation of fictitious wealth.”

“The lack of profit expectations in the real economy diverts huge masses of money, in search of that profitability, to the financial sphere, where they are currently higher and, above all, more immediate”, reflects the professor, who acknowledges that “the positive reading of that bursatilization It occurs when funds that reach the markets of the different countries are used to undertake or encourage new investment of companies “, although, in his opinion,” and every day more, the vast majority of these movements seek financial gain and not a part of the profit of listed companies. “

In theory, a ratio of securitization high, but not skyrocketing, should respond to a modern economy already an efficient stock market and representative of real activity, as it is one of the main financing and participation vehicles. The extraordinary context of the pandemic removes this hypothesis.

Higher increases

This extraordinary context has favored increases in the securitization from countries such as Switzerland or the United States, which after the pulse it maintained with China during the first part of 2021, the North American country has ended up leaving the Asian giant behind in terms of how quickly they have recovered after the worst part of the pandemic. In this way, the American culture of investment has become evident once again by almost tripling the more than 20 trillion dollars of GDP that the International Monetary Fund estimated for the United States in 2021.

It is true that the relationship between China’s GDP and capitalization Part of its explanation of its listed companies is the great growth that the country’s economy has experienced, which began the recovery from the coronavirus earlier than most.

Spain was an example in which securitization has barely undergone changes

However, the convulsions caused by large companies in the country ?? such as Evergrande, which aroused suspicion in the markets due to its high debt and the possibility that real estate would cause a domino effect across the globe ?? It has favored investments to deposit their money in other economies. What is clear is that the securitization in the emerging countries was diminished, as is the case in Turkey, Brazil and to a lesser extent in Russia or Mexico.

Spain was an example in which the securitization It has hardly changed since 2019 and has only risen one percentage point since then and stood at 57% after the Ibex 35 was one of the European indices that less earnings accumulated in 2021.