Author: Abdolreza Iesvand Heidari, Date Sep 5, 2024
This analysis and modeling, conducted by Global MetaRisk Corp, explores the relationship between World’s Market Cap Risk and GDP growth from 2000 to 2024. The data used in this study was sourced from the World Federation of Exchanges. The findings highlight key periods, such as the 2008 financial crisis and the 2020 pandemic, where increased market cap risk aligned with significant GDP slowdowns.
Analysis of Market Cap Risk and World GDP Growth Trends
The chart bottom displays the comovement between World’s Market Cap Risk and World GDP Growth from 2000 to 2024. Here are some stylized facts:
1. Inverse Relationship in Some Periods: During the 2008 financial crisis, the sharp rise in market cap risk (1.69%) coincided with a significant slowdown in global GDP growth (2.06%). Similarly, in 2020, the COVID-19 pandemic caused a spike in market cap risk (1.07%) with a steep GDP contraction (-3.06%).
2. Periods of Growth Stability: From 2010 to 2019, both market cap risk and GDP growth remained relatively stable, with market cap risk generally under 1% and GDP growth fluctuating between 2-4%.
3. Market Rebound and GDP Surge in 2021: After the pandemic-induced contraction, market cap risk dropped (0.69%), while global GDP showed an unprecedented surge of 6.23%.
4. Recent Trends: As of 2024, market cap risk appears to stabilize at lower levels, while GDP growth has moderated post-pandemic, reflecting economic adjustments.
Conclusion on Risk and GDP Relationship
Periods of increased market cap risk generally correlate with economic slowdowns, especially during major crises (2008, 2020). However, during stable economic conditions, both indicators show modest movements, suggesting that while market cap risk can signal economic stress, other factors also influence GDP growth trends.
