This visualization provides a historical perspective (Q4 1975-Q3 2021) on the levels of U.S. GDP, debt, and total market capitalization of U.S. public companies. Of particular interest is the period just after the 2020 recession. The U.S. economy experienced a short but deep recession in Q1 2020, at the start of the COVID-19 pandemic. This recession produced steep declines in the U.S. stock market, the GDP, and employment.

The U.S. government undertook massive stimulus spending to combat the recession and other economic effects of the pandemic. The Federal Reserve also lowered interest rates and eased monetary policy. The recession ended in April 2020. It lasted only two months, making it the shortest U.S. recession on record. The U.S. economy and the stock market have rebounded sharply since March 2020. However, government action to aid the recovery from the recession also led to significant increases in U.S. debt. In fact, the growth rate of debt in the post-recession period far outpaced GDP growth. The post-recession stock market returns likewise outpaced GDP growth.

Between Q4 2019 (the last quarter before the 2020 recession) and Q3 2021, the U.S. GDP increased by 7.0% (annual growth rate of 3.9%), but the total U.S. stock market capitalization (market capitalization of U.S. public companies) increased by 37.8% (annual growth rate of 20.1%), and U.S. debt increased by 22.5% (annual growth rate of 12.3%). During the same period, real U.S. GDP increased by only 1.4% (annual growth rate of 0.8%).

The rapid growth of the U.S. stock market during the post-recession period has resulted in unusually high valuations. Compare the current stock market valuations with those at the market peak just prior to the 2008 financial crisis. In Q3 2007, at the peak of the stock market prior to the 2008 financial crisis, the total U.S. stock market capitalization exceeded the GDP by 43%. But in Q3 2021, the total U.S. stock market capitalization exceeded the GDP by 101%. Such historical comparisons raise significant concerns about the sustainability of current valuations.

The recent U.S. debt to GDP ratios also appear to be the highest on record. In Q4 2020, the U.S. debt to GDP ratio was about 129%. Prior to 2020, the highest recorded level for the U.S. debt to GDP ratio was in 1946, just after World War II, when the U.S. debt to GDP ratio was 119%. By comparison, in Q4 2000, the U.S. debt to GDP ratio was only 54%.

This visualization also examines the relationship between the U.S. stock market capitalization and U.S. debt. There is a high level of correlation between these two variables. The correlation between U.S. debt and the U.S. stock market capitalization suggests that at least some of the stock market rise during the post-recession period is attributable to deficit spending and increasing debt levels. The key question for investors and policymakers is whether the stock market and debt can continue to rise without leading to more inflation and other adverse effects for the U.S. economy.