The financial news through the end of April 2014 is pretty bland, at least as regards stocks. Stock prices are just a smidgen higher (1.9%) than they were at the start of the year. And the amount of daily volatility is about two-thirds the long-term average. At flat times like these, the financial media seems to try extra hard to come up with a startling fact to liven things up. Thus Barron’s magazine today (May 5 edition) reports that the number of stocks on the New York, NASDAQ and American exchanges has shrunk 43% from the 1997 peak. Back then 8,823 stocks were listed, today there are 5,008. Mergers, private-equity buyouts and an “anemic” initial-public-offering market are to blame, says the Barron’s story.
This decline seems to me to be a fairly big development and it appears to have snuck up on us. Yes, there has been an explosion in exchange-traded funds (ETF’s), and these have got much press. These are a new low-cost way to own groupings of existing stocks. But the basic building blocks for ETFs, and mutual funds for that matter, are still common equities, and the number of these is down almost by half, if the Barron’s report is accurate. This mechanic feature alone would tend to support stock prices. But like all statistics, especially startling ones, the report needs a long hard second look to make sure we are getting the full story.