A world of equities that is increasingly losing weight. This is how the European stock market front has looked over the past 25 years. In 2000, the markets of the old continent represented 34 percent of the world's capitalization. At the end of 2024, the share was 14.5 percent. In absolute terms, of course, the market capitalization of "Made in Europe" has grown. At the beginning of the millennium it was worth $6,850 billion; today it is more than $11,230 billion. However, the underlying discourse remains unchanged: the weight of the Old Continent's stock exchanges in the world's stock markets has declined. If we look closely, this decline is linked to the opposite dynamics of the United States and the emerging markets: the U.S. stock exchanges had a weight of just under 50 percent at the beginning of the century and had risen to 66.6 percent by December 31, 2024; the emerging markets, for their part, have gone from 5.2 percent of global market capitalization to the current 10 percent.
In short, some have lost weight and others have gained weight. It is true that Europe will be overtaken by the emerging markets in terms of global market capitalization by the end of 2024, if the addition of small caps is maintained. To sum up, the scenario is as follows: the equity markets "Made in Europe" have lost a lot of weight, giving way to those of the United States and being overtaken by the emerging markets. So much for the percentages and the trends. But what are the reasons for this dynamic? A first cause is the role of technology and publicly traded high-tech companies. The knowledge economy that dominates our lives has accelerated, especially in recent years, as a result of digitalization, the computerization of processes, and issues such as artificial intelligence (AI). All areas in which the largest companies in the world (from Microsoft to Alphabet, from Apple to Nvidia) are based in the US and listed on the US stock exchange. A state of affairs that, through the explosion of their share prices, has helped to put the market capitalization of "Made in USA" into orbit. Is this surprising? The answer is no. To understand this, it is enough to go back in time to the beginnings of the chip industry, one of the "wellsprings" of the knowledge economy. In the late 1950s, microprocessors found room to expand because they were in the crosshairs of the U.S. military establishment. Of course, the initial push came from NASA, which needed chips for its computers like bread in its race with the Russians to conquer the moon. But it is the U.S. Navy's missile contracts that line the pockets of companies like Texas Instruments. Well, it is this combination - together with the economies of scale guaranteed by the "continental US", the large supply of brains and lots of venture capital - that contributed to the birth of Silicon Valley and the local high-tech industry. On closer inspection, this was lacking on the other side of the Atlantic. In Europe - although technology applied to industry is strong and there are many excellent projects and realities - there has not been a real broad demand related to the military (like it or not). This has led to a lack of impetus for the creation of high-tech giants. And in the absence of these - we see this in the present with Ia - the European stock markets have failed to take full advantage of the technology train.
But it is not just a question of high-tech and the military world. Another key issue is the lack of attention, if not outright hostility, to markets by politicians. In America, but also in emerging markets like India, stock exchanges are seen as essential strategic assets for social and economic expansion. This is not the case in Europe. We are inundated with regulations that stifle rather than support the development of stock markets.
All for the sake of control, the benefits of which are not clear. Nevertheless, the creation of the European single market and the euro have given a nice boost to the stock markets of the old continent, even if it is undeniable that the project is not yet complete. In this sense, the absence of a single European stock exchange is a case in point. In the United States, the reference markets are Nasdaq and Wall Street. Here, on the other hand, we have the fragmentation of the financial markets, partly because of too many parochialisms and nationalisms.
From regulation to culture. Yes, because there is also this front at the level of investors and entrepreneurs. In fact, the American world is inherently more supportive of the idea of venture capital. Star-studded households had 25.2 percent of their wealth invested in the stock market last year. This figure is not remotely comparable to that of Europeans, for example, who are characterized by a low single-digit percentage of equity. These same companies, thanks in part to the long period of zero interest rates resulting from ultra-expansive monetary policies, have then leveraged themselves heavily with debt, without favoring the stock market channel. Again, in short, an environment that facilitated the higher marginality of European markets. Not only compared to America, but also to countries like China and India. The latter, in particular, recorded a record number of IPOs (over 320) in 2024, demonstrating the extreme dynamism of the market. On the one hand, this is positive, but on the other, it creates problems. It should not be forgotten that in America, the high-tech giants that have contributed to the expansion of Wall Street also represent an unprecedented concentration of power. That is a negative. The hope? That even under a Trump presidency, antitrust will continue to strike a few blows.