[mattmanser]

It explains each of the indicators on the page. Click the "Market Overvaluation" button (albeit with a pretty poor UI and terrible URL support so I can't link it).

It's basically the value of US companies on the stock market divided by the GDP, $27 trillion / $20 trillion = 135%.

Although it makes you wonder about if all that stashed money overseas is having a significant impact on that.

[schrodinger]

Wouldn’t companies with a strong international presence (e.g. Apple) contribute to that? It seems like increased globalization could explain that high ratio rather than “overvaluation.”

[dannyw]

That would be counted in America's GDP.

The metric as designed is more flawed, because not all companies are public.

[gok]

Exports contribute to GDP but sales between foreign subsidiaries do not. So a Toyota made in Toyota-owned Kentucky factory contributes to the US GDP. This is in contrast to GNP; that US-made Toyota would count towards Japan's GNP.

[stonemetal]

Is the value of stock supposed to equal the GDP?

It is my understanding that the value of a stock should be equal to present value of future cash flows. If those future cash flows are growing faster than the discount rate then a value higher than 100% of GDP is to be expected.

[crazygringo]

Agreed. I've never come across this particular metric before, but intuitively I would have expected something more akin to a P/E ratio in the 10's or even 20's, not a factor of 1x.

Can anyone explain here why the stock market cap isn't much, much higher than a single year's GDP?

Is it because GDP is essentially "revenue" while market cap is "discounted future profits" -- and thus 20 years of 5% profit is going to be on the same order of magnitude of 1 year of revenue?

[the_gastropod]

There are only ~5,000 publicly traded companies in the U.S. There are about 25 Million small businesses in the U.S. The stock market cap represents a tiny portion of the entire U.S. economy.