Shrinking Public Markets and Rising Valuations

November 30, 2017 | Jeffrey Hoffmeyer, CFA, Lead Analyst, Asset Allocation

Barring a correction in December, most U.S. equity indices are looking at another successful year of double digit returns.  While investors can rejoice in their strong portfolio performances, there is an air of caution as valuations are well above historical averages.  This has been an area of concern for the last few years, yet markets continue to outperform and valuations keep rising.

One possible explanation for this is the decline in the total number of publicly traded companies.  Since peaking in the mid 1990s, listed companies have fallen by nearly 50% to about 4,300 firms despite the total number of companies in the U.S. remaining about the same.  More regulation as well as increased availability of private capital have made businesses less likely to go public.  Most retail investors, however, do not have the capability to invest in private markets.  With fewer investable options there is more money to go around to these publicly traded firms.

While most of the companies that choose to be public are larger than their private counterparts, this suggests the historic average valuation of about 20x earnings is too low of a benchmark for today’s publicly traded firms.  These higher equity valuations may be the new normal and the bull run could continue in 2018.

Print PDF


The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

Jeffrey Hoffmeyer, CFA
Lead Analyst, Asset Allocation

Get to Know Jeffrey

Related Content


The Sixth Fed Hike and Rising LIBOR

The Federal Reserve announced its sixth rate hike on Wednesday, with the target fed funds rate now 1.5% – 1.75%….


What Will Drive Inflation Higher in 2018?

Driven by the rising price of oil, the unknown ultimate impact of the tax cuts, strong global economic growth and…

Historical Vix levels


Is This the End of a Low Volatility Regime?

For most of 2017, we were fixated on the unusually low volatility environment. Despite a number of geopolitical challenges, markets…


Italian Elections and a Possible EU Exit

With Italy’s general election set for March 4th, this week’s chart examines the probability of a Euro break-up. This time…


U.S. Venture Capital Market Environment

As a growing number of participants have entered the private markets, the amount of total dry powder has increased. Venture capital…


Value Underperformance in the Current Market Cycle

With the value premium seemingly in decline, value investors have had a lot to complain about over the past ten…

More articles

Subscribe to Research Email Alerts

Research Email Alert Subscription

Research alerts keep you updated on our latest research publications. Simply enter your contact information, choose the research alerts you would like to receive and click Subscribe. Alerts will be sent as research is published.

We respect your privacy. We will never share or sell your information.

Thank You

We appreciate your interest in Marquette Associates.

If you have questions or need further information, please contact us directly and we will respond to your inquiry within 24 hours.

Contact Us >