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Based upon a rough estimate of the total value of the DJ Wilshire 5000, which is said to capture 90% of the value of the stock market, I estimate that the overall U.S. stock market is roughly $17 trillion in size. (Note: With the precipitous drop in the stock market, the total value of the stock market is now closer to $12 trillion.) By comparison, the U.S. mortgage market is $14 trillion; corporate and foreign bonds (denominated in U.S. dollars) are $10 trillion, U.S. Treasuries are about $5 trillion and municipal bonds are about $2.5 trillion. (All of this is based upon Federal Reserve figures.)
There is some overlap in the various bond sectors as presented here. For example, most mortgages are financed by Agency and GSE securities. So the total investable universe is smaller than the $46 trillion sum of all of the fixed income sectors, as presented in Chart 2. Even so, the bond market is collectively much bigger than the stock market.
Some of these sectors are dominated by institutional investors; but most are accessible to the individual investor, if not directly, then through bond mutual funds. Over the past decade or so, sectors that have been mostly closed to individual investors have opened up. Today, individual investors have greater access than ever to corporate, Federal Agency and municipal bond offerings, for example, either through financial advisors at traditional brokerage firms or from relatively new trading platforms at discount brokers.
Chart 2
Fixed income sectors vs. the stock market (in $ trillions) 2007
Source: U.S. Federal Reserve and Income Builder Estimates
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_________________________________________________________________________________
Originally published February 28, 2008
Stephen P. Percoco
Income Builder
P.O. Box 1409
Mashpee, MA 02649
(732) 763-0763
incomebuilder@larkresearch.com
© 2008 Lark Research, Inc. All Rights Reserved. Information is carefully compiled but not guaranteed to be free from error. Specific reference to any specific security should never be construed as a solicitation to either buy or sell. Reproduction without permission from the publisher is prohibited.