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Dissecting the Stock Market Thumbnail

Dissecting the Stock Market

Global Market Commentary Investment Planning

Mike Earl, CFP®, CPWA®


As students of investing and markets, one of our passions is helping our clients grow in knowledge and appreciation of how the US stock market works. What exactly is "the stock market"? Today, there are approximately 3,667 publicly-traded companies in the US -- collectively worth over $50 trillion. 

Considering that the US is home to nearly 32 million small businesses, these publicly-traded companies constitute just 0.01% of the total businesses in the US. These are the behemoths. Even the smallest companies in the US stock market (called "micro-cap" companies) are still valued at over $1 billion and generate revenue of hundreds of millions of dollars annually. 

The picture below (from finviz.com) is a great visual of the US stock market.

  • The size of each company box is proportionate to their market capitalization (or value of the company, which equals share price times # of shares outstanding).
  • The largest 25 companies in America hold 42% of the stock market's total value. Lest that concentration be of concern to you, note that those same companies generated 46% of the total stock market's net income in the most recent quarter (hat tip: Ben Carlson and Pranav Ghai).
  • There are currently ten sectors in the US stock market. Technology is the largest sector by a healthy margin (~ 25% of US market).
  • Google is not a tech company (from a sector classification standpoint). Neither is Amazon, Facebook (I won't call it Meta yet), Tesla, or Netflix.
  • The US stock market is dynamic. It evolves and continues to charge higher.
    • In 1980, energy companies held 30% of the stock market's total value. Today, they comprise just 3% of the stock market's value (don't bet on the energy sector remaining that small...we expect some mean reversion here).
    • In 2006, financial companies were nearly 22% of the stock market. They bottomed at just 10% of the stock market in mid-2020, and have now rebounded to about 13% of the stock market.

What will the stock market look like in 20 years? There will be new mega-companies at that point in time -- companies being founded today that will grow into trillion-dollar companies. Our advice: don't bet against innovation, free markets, and the US of A.