The Disappearance of the Stock Market

For most of the modern era, the U.S. stock market stood at the center of capitalism—a transparent, hyper-liquid marketplace where ideas turned into companies and companies turned into wealth. But over the last 30 years, something fundamental has shifted. The public market for stocks hasn’t disappeared, and it hasn’t broken. It simply became less central, a thinning layer on top of a growing universe of private capital.

There are fewer stocks trading in the U.S. today than there were in 1980. That's a 50-year low.

This trend has accelerated since 2000. Four long-term forces explain how we got here:

1. The Post-Crisis Regulatory Clampdown

After the internet bubble, Washington rewrote the rulebook. The intent was good (preventing another collapse) but the practical effect was to make going public far more burdensome.

New layers of compliance, board liability, and disclosure didn’t just raise costs—they changed incentives. If a company could raise billions privately, avoid the glare of quarterly earnings, and delay the circus of public reporting, why rush toward an IPO?

The public markets became safer, yes. But they also became less appealing as a funding source for growth companies.

2. The Rise of Passive Investing

Index investing unlocked extraordinary benefits for investors: simplicity, diversification, and ultra-low cost. But it also rewired how the market allocates capital.

When trillions of dollars flow automatically into benchmarks, companies stop being judged primarily on story, performance, or potential. They’re judged on membership. Inclusion in the S&P 500 matters more than the subtle distinctions that once shaped stock selection.

This shift has had cascading effects:

• ‍Companies have less incentive to go public. They know they’ll become just one more weight in a benchmark, not a business evaluated on its merits.‍
• Market signals weaken. When flows matter more than fundamentals, prices carry less information. Markets become quieter… but also less discerning.

There are now more exchange-traded funds (ETFs) than there are stocks for them to buy. It is a type of overfinancialization. Passive investing made markets cheaper and more efficient—but at the cost of vibrancy and depth.

3. A Decade of Nearly Free Money

From 2009 to 2022, capital was almost free for private equity firms (and everyone else). Low interest rates transformed private markets from niche to dominant.

Private investors could offer:

• Easier fundraising
• Patient capital
• Freedom from public scrutiny

Why endure the quarterly earnings ritual when you could raise billions from private funds willing to wait ten years for payoff?

This “free-capital era” allowed companies like Uber, Airbnb, SpaceX, and Stripe to become global giants without relying on public markets. Some of the world’s most important growth stories live entirely outside the stock market – especially in areas such as robotics and AI.

Low rates didn’t weaken public markets, they simply made them optional.

4. The Private Equity Boom

Private equity is no longer a corner of the investment world; it is a $13 trillion industrial machine that absorbs, restructures, and reshapes companies at scale.

PE firms increasingly buy public companies outright, improve them privately, and sometimes never return them to public exchanges. They’ve turned delisting into a routine, removing many mid-cap companies that once gave public markets their depth.

As more businesses are acquired, streamlined, and held privately, the investable universe for public investors shrinks.

Why Public Markets Still Matter

Taken together, these forces might sound like they’re pushing the U.S. stock market into irrelevance. That’s the wrong conclusion. What’s actually happening is a rebalancing of the capital ecosystem. Public equities are becoming one platform among many, not the only game in town.

Despite the gravitational pull of private markets, the U.S. stock market retains enduring advantages for long-term investors.

1. Liquidity You Can Rely On

No private vehicle comes close to the liquidity offered by public equities. You can enter or exit positions instantly, without lockups, redemption windows, or multi-year holding periods. Liquidity is optionality—and optionality is freedom.

2. Transparency and Governance

Public companies are required to disclose financials, strategies, risks, and executive compensation. While occasionally burdensome, these disclosures also create a level of insight and accountability that private equity simply does not match.

Private firms operate behind opaque walls; public firms operate under lights.

3. Access for the Many

Private equity has become the domain of institutions and the ultrawealthy. But public markets give every investor (large and small) access to world-class businesses at low cost. The democratization of investing remains one of the great strengths of the U.S. financial system.

4. Lower Fees

Private Equity funds often charge 2% management fees and 20% performance fees, plus pass-through expenses. Public equities, particularly through ETFs or direct ownership, offer low-cost exposure without the layers of intermediary economics that dilute returns.

5. Long-Term Outperformance

Over decades, broad public equity markets have outperformed most private asset classes net of fees. The long-term compounding power of innovation still favors equities. The stock market remains one of the most reliable engines of wealth creation ever built.