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Summary:
The article explores the dynamic landscape of financial markets, focusing on the impact of AI, 24-hour trading, and off-exchange trading. It highlights the growing dominance of U.S. tech companies and their appeal to global investors, while emphasizing the importance of the National Best Bid and Offer (NBBO) in ensuring market efficiency. Additionally, it delves into how stock markets drive economic growth, facilitate capital allocation, and benefit investors through dividends and buybacks. The piece concludes with insights into market fragmentation and the ongoing evolution of market structure to better serve participants.
What This Means for You:
- Enhanced Trading Opportunities: With the push toward 24-hour trading, investors globally can access U.S. markets during their local hours, increasing flexibility and opportunities.
- Improved Market Efficiency: Changes like smaller round lots and tighter spreads aim to make the NBBO more competitive, reducing trading costs for retail and institutional investors alike.
- Economic Growth: Investing in stock markets not only helps companies raise capital but also contributes to broader economic growth by financing innovation, creating jobs, and boosting GDP.
- Future Outlook: As markets become more fragmented and dark trading increases, regulators and exchanges must balance innovation with investor protection to maintain market integrity.
Original Post:
Last year was a busy year for the markets. It included macro events like tariffs, artificial intelligence (AI) and the growing dominance of U.S. tech companies attracting ever more global retail investors. That, in turn, led to ongoing growth of off-exchange trading and plans for 24-hour trading — both of which make a better National Best Bid and Offer (NBBO) even more important.
Today we look at my 10 favorite charts from 2025.
1. Stock markets are good for the economy
You might think it is obvious that stock markets are good for the public. Accounting statements make it easier for more investors to efficiently value companies and allocate capital, and that capital allows companies to expand, build new factories or products, and hire more workers. Investors also own a share of the returns each company earns.
But last year we found a number of new data points that support that intuition.
- One chart from this blog shows that countries with high levels of direct ownership in stocks – like the U.S., Sweden and Australia – also tend to have higher valuations. That’s good for companies as it reduces their costs of capital, making more investments even more likely.
- This ties with a WFE paper that we also referenced, that found countries that can grow their equity markets result in stronger GDP growth.
- In that same blog, we also showed that stocks do increase investor wealth more than most other assets over the very long run, making them an important element of wealth creation.
What we see is that the whole ecosystem is important — public access to companies, public interest in companies, transparent prices and accounting data to make valuations easier, and companies interested in going public. Altogether, stock markets make economies and household finances stronger.
Chart 1: Countries with more equity ownership have higher stock valuations
2. Markets help companies finance in many different ways
Speaking of companies raising capital and distributing returns back to their investors…
We showed SIFMA data highlighting that, as exciting as initial public offering (IPO) day is for a company and investors, IPO proceeds raised are a fraction of all capital raised by the U.S. stock market each year. For example, in 2024:
- IPOs raised a total of $30 billion.
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