5 Things That Have Changed the Stock Market Over the Last 20 Years


As a trader or investor, it is important to understand that the nature of the stock market has changed in some big ways over the last 20 years. This article will highlight the 5 big trends.

Private Investors are Less Involved in Active Trading

In 1998 60% of U.S. adults had investments through mutual funds ore retirement plans, this has reduced to 38% in 2018 according to a 2018 Gallup Poll. The exact reasons for this are unclear but all indications point to less disposable income as U.S. wages are not increasing as they used to in previous decades. Also, younger investors up to the age of 35 have lived through 2 mighty crashes, the dotcom crash in 2000 and the financial crisis of 2007. For younger investors this has weakened their confidence in the stock market and holds them back from long-term investing.

The Rise of the Robots

As the numbers of independent investors in the market have decreased, the amount of robotic or algorithmic trading has increased dramatically. According to JP Morgan the robotic trading accounts for 90% of all volume in the stock market. This one of the few sure-fire ways to make money in the markets as the robots are there to scalp small amounts from the bid and ask prices on the exchanges.

Improved Chart Analysis Tools

The last 20 years however have seen huge improvements in the quality of software available to the independent retail investor. With advances in the compute power of PC’s and Tablets we see the rise of stock market charting software like MetaStock that can run complex systems to back test ideas and even forecast results into the future.

Also, with improvements in the stability of the internet and cloud storage, you do not even need a powerful computer to analyse the stock market, companies like TradingView enable a full chart analysis experience through a web browser using HTML5.

Microscopic Media Coverage

The rise of news outlets covering the financial sector and specifically the stock market has grown tremendously over the last 2 decades. CNBC markets, CNN Money and of course Bloomberg cover the markets on TV but also over the internet there are thousands of news outlets, websites and blogs covering tiniest moves in the market. It can be overwhelming. Sometimes you need to simplify the overwhelming amount of information and distil it down to the essential analysis of what is actually happening in the stock market today.


Too Big to Fail

The concept of too big to fail gained popularity in the financial crisis of 2007 as the U.S. government and federal reserve worked to piece together the broken U.S. economy. The too big to fail notion means refers to companies or institutions that are so large that if they were mismanaged and failed that they could break an economy. The shadow of too big to fail still looms large and those institutions have not been broken up enough to remove the threat.


What Has Not Changed?

The market continues to go up over the long-term. According to stock market statistics a single $1000 investment in 1930 in the S&P500 index would have yielded nearly $160,000 dollars, essentially a return of 160 times the original investment, despite 18 recessions and crashes.

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