Global Equity Market Perspectives: Nothing Is Permanent
The share of global GDP among the world’s largest economies continues to shift, shaped by economic policy, technology and demographics. Equity market share has also shifted over decades.
How have things changed? Seasoned investors may recall a time when the prevailing view was that Japan would surpass the U.S. as the world’s largest economy. During the late-1980s Japanese asset price boom, the Nikkei 225 rose from about 12,000 in 1985 to 38,915 in 1989: a 225 percent gain in four years. At that time, land under Tokyo’s Imperial Palace was said to be worth more than the entire state of California. In 1989, Japan held nearly 40 percent of global market capitalization. Two decades later, its share had fallen to just 7 percent. Meanwhile, the developing economies of China and India, largely absent from charts in 1989, were rapidly expanding. Today, they together account for over 13 percent of global market value.
Where will we be in the next 20 years? Japan’s experience reminds us that economic leadership is never fixed, and today’s assumptions about global dominance may look very different in the future.
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