Why Capital Markets MatterCapital markets recognize and drive capital to the best ideas and enterprises. Coupled with the free flow of capital, innovation is an integral component for supporting job creation, economic development, and prosperity. Markets facilitate
investment from those who seek a return on their assets to those who need capital and credit to grow.
Clients benefiting from healthy capital markets include both individual and institutional investors, governments, and corporations. Whether equity or debt, capital can be used to grow businesses, investment in new technology, plant, and equipment or fund infrastructure developments. This grows the economy and creates jobs and wealth. Further, individuals and businesses can invest in securities to generate wealth.
US Capital Markets Are the Largest in the WorldThe U.S. capital markets are the largest in the world and continue to be among the deepest, most liquid and most efficient.
Equities: U.S. equity markets represent 41% of the $118 trillion in global equity market cap, or $48 trillion; this is 3.6x the next largest market, China.
Fixed Income: U.S. fixed income markets comprise 39% of the $123 trillion securities outstanding across the globe, or $48 trillion; this is 1.9x the next largest market, the EU (excluding the U.K.).
Capital Markets Fuel EconomiesU.S. capital markets are the bedrock of our nation’s economy.
Capital markets are critical to financing economies and supporting economic growth, as they enable the efficient allocation of risk and transfer of capital across parties.
In the U.S., capital markets fund 73% of all economic activity, in terms of equity and debt financing of nonfinancial corporations. This ensures businesses have easy and consistent access to liquidity and affordable funding to fuel growth and create jobs.
Capital markets enable debt issuance, which is a more efficient and less restrictive form of borrowing for corporations. The use of debt capital markets is more prevalent in the U.S. at 80% of the total (versus 20% bank lending), compared to only 20%-30% in other regions (where bank lending is more dominant at 70%-80%), excluding China which is almost all bank lending given nascent bond markets. Capital markets function as shock absorbers during times of economic or market turmoil, whereas bank lending can dry up under stress. As such, capital markets form a more stable source of power for companies, governments, and economies.
On the equities side, companies need capital to invest in growth, fund mergers and acquisitions, and many other operational purposes. Firms have several options to generate capital, including issuing IPOs, which allow businesses to grow, innovate, and better serve their customers.