2018 Outlook: Through the Looking Glass

Trends in the Capital Markets

SIFMA is the voice of the U.S. securities industry. We are a member-driven organization that advocates for effective and efficient capital markets.

We represent the broker-dealers, banks and asset managers whose nearly 1 million employees provide access to the capital markets, raising over $2.5 trillion for businesses and municipalities in the U.S., serving clients with over $18.5 trillion in assets and managing more than $67 trillion in assets for individual and institutional clients including mutual funds and retirement plans.

Our members represent 75% of the U.S. broker-dealer sector by revenue and 50% of the asset management sector by assets under management. We convene more than 13,000 financial professionals on approximately 100 committees and societies, as well as countless task forces and working groups. Together, we are invested in America.

This report contains our insights into the markets, the industry’s viewpoints on critical policy issues and several helpful resources.

 

Excerpt

Market Insights

The capital markets fuel the U.S. economy, providing 65% of funding for economic activity. Today, GDP growth is slowly starting to pick up and the financial system is strong. And yet, the U.S. economy has experienced the slowest economic recovery of the post-war period. Real gross domestic product stands at only 112% of the 2007 level, and the economy has been stuck in low gear. The financial system has absorbed hundreds of new regulations in the decade since the financial crisis. While many of those regulations have made the financial system safer and more resilient, they are not without cost. To meet these requirements, financial institutions have built up excess capital and liquidity. Liquidity1 is up 4x for the CCAR2 banks since 2006. This is exaggerated for the G-SIBs3, those exposed to a longer list of regulations given their increased complexity and size, with liquidity up almost 5x. This is excess liquidity that remains trapped in the system. We wonder how much stronger the economy could be if financial institutions had the flexibility to release more of this excess capital and liquidity into the economy.