Markets
The $80 Trillion World Economy in One Chart
Check out the latest 2023 update of the world economy in one chart.
The $80 Trillion World Economy in One Chart
Check out the latest 2023 update of the world economy in one chart.
The latest estimate from the World Bank puts global GDP at roughly $80 trillion in nominal terms for 2017.
Today’s chart from HowMuch.net uses this data to show all major economies in a visualization called a Voronoi diagram – let’s dive into the stats to learn more.
The World’s Top 10 Economies
Here are the world’s top 10 economies, which together combine for a whopping two-thirds of global GDP.
Rank | Country | GDP | % of Global GDP |
---|---|---|---|
#1 | United States | $19.4 trillion | 24.4% |
#2 | China | $12.2 trillion | 15.4% |
#3 | Japan | $4.87 trillion | 6.1% |
#4 | Germany | $3.68 trillion | 4.6% |
#5 | United Kingdom | $2.62 trillion | 3.3% |
#6 | India | $2.60 trillion | 3.3% |
#7 | France | $2.58 trillion | 3.3% |
#8 | Brazil | $2.06 trillion | 2.6% |
#9 | Italy | $1.93 trillion | 2.4% |
#10 | Canada | $1.65 trillion | 2.1% |
In nominal terms, the U.S. still has the largest GDP at $19.4 trillion, making up 24.4% of the world economy.
While China’s economy is far behind in nominal terms at $12.2 trillion, you may recall that the Chinese economy has been the world’s largest when adjusted for purchasing power parity (PPP) since 2016.
The next two largest economies are Japan ($4.9 trillion) and Germany ($4.6 trillion) – and when added to the U.S. and China, the top four economies combined account for over 50% of the world economy.
Movers and Shakers
Over recent years, the list of top economies hasn’t changed much – and in a similar visualization we posted 18 months ago, the four aforementioned top economies all fell in the exact same order.
However, look outside of these incumbents, and you’ll see that the major forces shaping the future of the global economy are in full swing, especially when it comes to emerging markets.
Here are some of the most important movements:
India has now passed France in nominal terms with a $2.6 trillion economy, which is about 3.3% of the global total. In the most recent quarter, Indian GDP growth saw its highest growth rate in two years at about 8.2%.
Brazil, despite its very recent economic woes, surpassed Italy in GDP rankings to take the #8 spot overall.
Turkey has surpassed The Netherlands to become the world’s 17th largest economy, and Saudi Arabia has jumped past Switzerland to claim the 19th spot.
Markets
Beyond Big Names: The Case for Small- and Mid-Cap Stocks
Small- and mid-cap stocks have historically outperformed large caps. What are the opportunities and risks to consider?
Beyond Big Names: The Case for Small- and Mid-Cap Stocks
Over the last 35 years, small- and mid-cap stocks have outperformed large caps, making them an attractive choice for investors.
According to data from Yahoo Finance, from February 1989 to February 2024, large-cap stocks returned +1,664% versus +2,062% for small caps and +3,176% for mid caps. Â
This graphic, sponsored by New York Life Investments, explores their return potential along with the risks to consider.
Higher Historical Returns
If you made a $100 investment in baskets of small-, mid-, and large-cap stocks in February 1989, what would each grouping be worth today?
Small Caps | Mid Caps | Large Caps | |
---|---|---|---|
Starting value (February 1989) | $100 | $100 | $100 |
Ending value (February 2024) | $2,162 | $3,276 | $1,764 |
Source: Yahoo Finance (2024). Small caps, mid caps, and large caps are represented by the S&P 600, S&P 400, and S&P 500 respectively.
Mid caps delivered the strongest performance since 1989, generating 86% more than large caps.
This superior historical track record is likely the result of the unique position mid-cap companies find themselves in. Mid-cap firms have generally successfully navigated early stage growth and are typically well-funded relative to small caps. And yet they are more dynamic and nimble than large-cap companies, allowing them to respond quicker to the market cycle.
Small caps also outperformed over this timeframe. They earned 23% more than large caps.Â
Higher Volatility
However, higher historical returns of small- and mid-cap stocks came with increased risk. They both endured greater volatility than large caps.Â
Small Caps | Mid Caps | Large Caps | |
---|---|---|---|
Total Volatility | 18.9% | 17.4% | 14.8% |
Source: Yahoo Finance (2024). Small caps, mid caps, and large caps are represented by the S&P 600, S&P 400, and S&P 500 respectively.
Small-cap companies are typically earlier in their life cycle and tend to have thinner financial cushions to withstand periods of loss relative to large caps. As a result, they are usually the most volatile group followed by mid caps. Large-cap companies, as more mature and established players, exhibit the most stability in their stock prices.
Investing in small caps and mid caps requires a higher risk tolerance to withstand their price swings. For investors with longer time horizons who are capable of enduring higher risk, current market pricing strengthens the case for stocks of smaller companies.
Attractive Valuations
Large-cap stocks have historically high valuations, with their forward price-to-earnings ratio (P/E ratio) trading above their 10-year average, according to analysis conducted by FactSet.
Conversely, the forward P/E ratios of small- and mid-cap stocks seem to be presenting a compelling entry point.Â
Small Caps/Large Caps | Mid Caps/Large Caps | |
---|---|---|
Relative Forward P/E Ratios | 0.71 | 0.75 |
Discount | 29% | 25% |
Source: Yardeni Research (2024). Small caps, mid caps, and large caps are represented by the S&P 600, S&P 400, and S&P 500 respectively.
Looking at both groups’ relative forward P/E ratios (small-cap P/E ratio divided by large-cap P/E ratio, and mid-cap P/E ratio divided by large-cap P/E ratio), small and mid caps are trading at their steepest discounts versus large caps since the early 2000s.
Discovering Small- and Mid-Cap Stocks
Growth-oriented investors looking to add equity exposure could consider incorporating small and mid caps into their portfolios.
With superior historical returns and relatively attractive valuations, small- and mid-cap stocks present a compelling opportunity for investors capable of tolerating greater volatility.
Explore more insights from New York Life Investments
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