Equity, Debt, and Market Cap

This chart juxtaposes three key indicators of economic health: the total market cap, as represented by the Wilshire 5000 Index, homeowners' equity in real estate, and total mortgage liabilities held by households and nonprofit organizations. All these are displayed in relation to Gross Domestic Product (GDP).

1. Wilshire 5000 Total Market Full Cap Index: This shows the total market capitalization of all U.S. equity securities, a broad measure of overall stock market performance.

2. Owners' Equity in Real Estate/GDP: This indicator presents the value of homeowners' equity as a proportion of GDP. A rising line suggests that homeowners' wealth relative to the economy's size is increasing.

3. Total Mortgages/GDP: This ratio reflects the total mortgage liabilities held by households and nonprofit organizations as a proportion of GDP. Higher values may indicate greater debt burdens relative to the economy's size.

By comparing these ratios, the chart provides a comprehensive view of the interplay between the equity market, real estate wealth, and household debt, in relation to the overall economy.

Potential Interpretations:

Positive Scenario: If the Wilshire 5000 Index and homeowners' equity ratios are rising while the mortgage debt ratio is steady or declining, it suggests robust financial markets and real estate sector, paired with manageable household debt levels.

Negative Scenario: If the Wilshire 5000 Index and homeowners' equity ratios are falling, while the mortgage debt ratio is rising, it could signal weakening financial markets, declining real estate wealth, and increasing household debt burdens.