Goldman Sachs projects that the US equity market capitalization will fall to 35% of the overall global market by 2030.
The collective capitalization of emerging markets, including China and India, is predicted to level the 35% mark in the same timeframe. By 2050, the EM share is anticipated to surpass the U.S. by a considerable margin taking up 47% of global stock markets.
The first factor underscoring this shift is the rapid growth projected for emerging economies.
Historically, as GDP per capita grows, capital markets in an economy become more sophisticated. We can see this in richer countries, which tend to have higher equitization of their markets.
India is projected to grow at the fastest pace. By 2030, it is forecast to take up 4.1% of the global equity market cap. Furthermore, the forecast maintains that by 2050 strong GDP per capita growth in India and demographic drivers will drive India’s equity market cap to overtop the euro area.
The second factor, although to a lesser extent, is emerging market rising valuation multiples driven by higher GDP per capita. Richer countries, as seen in the U.S., often trade at higher earnings multiples because they are viewed to have lower risk.
While the U.S. has outperformed in recent decades, this trend might not continue in the future, according to Goldman Sachs. Given the structural shifts induced by growing populations and GDP growth, in the future investors may consider diversifying their portfolios geographically.
To read more about Goldman Sachs forecast, follow the link: https://www.visualcapitalist.com/the-109-trillion-global-stock-market-in-one-chart/?