While the stock market might get more press, the U.S. stock market total capitalization is actually a bit smaller than the bond market, though neither is small. The stock market has just over $30 trillion in total market capitalization, meaning the value of all outstanding shares, while the total amount of debt owed through bonds is more than $40 trillion.
According to recent estimates, the US bond market is significantly larger the the US stock market in terms of market capitalization.
Exploring Bond Market Size
The bond market includes companies, government agencies and nonprofits that raise money by issuing bonds, essentially borrowing money at interest from investors. It's steadily grown in size over time, and according to the Securities Industry and Financial Markets Association, an industry group, the total amount of debt outstanding at the end of 2017 was more than $40.7 trillion.
That included more than $14.4 trillion in United States Treasury debt, more than $9.2 trillion in mortgage-related bonds, more than $8.8 trillion in corporate bonds and more than $3.8 billion in municipal bonds. While corporate and Treasury debt have essentially steadily increased over the past few decades, mortgage-related bonds are still off their peak from 2008, around the end of the housing boom and before the start of the great recession.
Assessing Stock Market Size
The stock market is usually measured in terms of total market capitalization, meaning the value of all shares in companies issued and tradable on public markets. Each share represents a stake in ownership in a publicly traded company. The value of privately held companies, from mom-and-pop operations to massive enterprises owned by private equity funds, usually isn't included.
The stock market has been booming in recent years, with popular indexes like the S&P 500 and the Dow Jones Industrial Average soaring, as investors see their holdings in many companies jump in value. According to a study from the Bespoke Investment Group, the total capitalization of the Russell 3000 Index, which includes more than 98 percent of the market's current capitalization, has recently reached $30 trillion.
Investing in Stocks and Bonds
Investors can buy individual stocks and bonds, of course, but they can also invest in funds that attempt to track the market as a whole. These types of index funds are generally cheaper to invest in when it comes to fees than actively managed funds that pick particular stocks or bonds to invest in.
Various funds track the performance of the Russell 3000, which includes the lion's share of U.S. stock market capitalization, and others track smaller indexes like the DJIA or the S&P 500. Others mirror the performance of the bond market as a whole.
Steven Melendez is an independent journalist with a background in technology and business. He has written for a variety of business publications including Fast Company, the Wall Street Journal, Innovation Leader and Ad Age. He was awarded the Knight Foundation scholarship to Northwestern University's Medill School of Journalism.