Wealth Creation in the U.S. Public Stock Markets 1926 to 2019

Abstract

This report quantifies long-run stock market outcomes in terms of the increases or decreases (relative to a Treasury bill benchmark) in shareholder wealth, when considering the full history of both net cash distributions and capital appreciation. The study includes all of the 26,168 firms with publicly-traded U.S. common stock since 1926. Despite the fact that investments in the majority (57.8%) of stocks led to reduced rather than increased shareholder wealth, U.S. stock market investments on net increased shareholder wealth by $47.4 trillion between 1926 and 2019. Technology firms accounted for the largest share, $9.0 trillion, of the total, but Telecommunications, Energy, and Healthcare/ Pharmaceutical stocks created wealth disproportionate to the numbers of firms in the industries. The degree to which stock market wealth creation is concentrated in a few top-performing firms has increased over time, and was particularly strong during the most recent three years, when five firms accounted for 22% of net wealth creation. These results should be of interest to any long-term investor assessing the relative merits of broad diversification vs. narrow portfolio selection.