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‘Too Big To Fail’ US Stock Market Isn’t So Exceptional Without Tech
US equities are "too big to fail."
That was one, among many, takeaways from what I have to say was a pretty good Q3 US equity lookahead piece from SocGen's Manish Kabra.
"Pretty good" is high praise coming from me. Over the years, I've come to question the value of most professional analysis, but Kabra's latest struck a nice balance between hitting the high points (which is really all you can do given the impossibility of forecasting the near-term direction of equity prices) and delving just d
Hate to be trite but is it right to compare US stock market with Gross “Domestic” Product. It’s a bit like the hyperbole going around that NVDA capital value is the same as GDP or income streams of some economies. Apples with apples, oranges with oranges please.
It’s not quite as apples to oranges as you’re making it out to be, although I take your point. GDP’s the market value of all finished goods and services for a given country. Market cap’s the market value of a given company. It’s remarkable that we’re valuing Nvidia more than the entirety of the goods and services produced by major advanced economies.
To uniformly fruit the comparison, we should value countries. Using NVDA’s LTM price/sales (39X), then France is worth about $120 trillion. Gosh, I’d better buy some.
Well, if the government could commandeer the economy with the efficiency of a CEO, you might have a point in using a P/S of 39X – France grows less fast than NVDA but, otoh, is more diversified and won’t disappear in however many years you might want to pick… while companies do disappear from the S&P or DJI with regularity…
But, right now, with low growth and an inability to coordinate, I’m not sure a 4X isn’t generous…