What has changed and what has not changed in the markets since 1979

Numbers tell the truth, they say, but they also tell little lies. Critical cognitive errors, the phenomenon of intangible wealth, and critical constants from the 1970s to today. Written by Theodore Krintas.

1979 was quite an eventful year. Our country became the tenth member of the EEC and we had our first female soldiers, following the passing of the law on voluntary enlistment in the Armed Forces. The Nobel Prize for Literature was awarded to the poet Odysseas Elytis, and Nikos Galis, a Greek-American basketball player, was "repatriated" from the United States on behalf of the champion Aris.

In Iran, the Islamic religious revolution of the mullahs and the overthrow of the Shah were completed in the first days of 1979, when Ayatollah Khomeini returned after many years of "self-imposed exile" in Paris. Margaret Thatcher became Prime Minister of Britain and began an almost decade-long period during which she completely dominated the island, despite the fact that her policies provoked protests, riots, and reactions.

Summarising events in the rest of the world, formal diplomatic relations were established between China and the US. The US House of Representatives began broadcasting its activities on the C-SPAN cable television network. Uganda's dictator, Idi Amin, was deposed. Sony introduced the Walkman. The smallpox virus was certified as eradicated, making smallpox the first human disease to be driven to extinction.

Another approach

The above facts are indisputable; they have been recorded by distinguished journalists and published in the world's most authoritative media outlets. However, are these the facts that society felt were of the greatest value?

The answer is obviously not simple, and perhaps cannot even be given, while the author has been conducting research in this field for more than ten years. However, it is interesting to examine it and even more so to discuss it.

More than 180 cognitive biases (biases in our behaviour) have been recorded that affect how we manage data, think critically, and perceive reality. The two we will use for this brief analysis are:

1. The endowment bias, according to which we demand more to give away than we are willing to give to acquire something.

2. The status quo bias, i.e., our desire for things to remain as they are.

To the above two, we will add the phenomenon of "intangible wealth" , i.e. the increase in household consumption when households become wealthier, essentially feeling wealthier due to the increase in the prices of shares, bonds, housing, etc.

Based on the above, perhaps an indication of the factors we consider most important in our lives at any given time can be gleaned from the stock markets, and in particular from the companies with the highest value in the world at any given time. We know from theory that a company's value is linked to its profits and these, at least in absolute terms, to the size of its sales. To a large extent, this is also true in practice.

The 70s and 80s

In the 43 years we examined, the 10 largest companies in terms of stock market value accounted for between 8% and 14% of the total market capitalisation of listed companies worldwide.

In the first two decades, starting in 1979, based on our approach, the issues that concerned the planet were the computerisation of companies, which we now call digital upgrading, fuel and energy with direct access (six of the ten largest companies in the late 1970s were in these sectors), and the acquisition of upgraded communications and electrical products.

Ten years later, the issues remain almost the same, with the strong upgrade of banks in the "value system" and food retail chains.

In other words, the driving force of the period is energy, adaptation to the times, communications, and consumption, even if all this is done with borrowed money. Isn't that the "job" of banks? Even Japanese ones?

The 1990s and 2000s

Consumerism is strengthened and gains ground during the period of growth. It is also the period of the rise of the personal computer, the creation of networks, and the spread of mobile telephony throughout the world, with large investments.

Interest in our health also grows rapidly, and so, along with food, the value of pharmaceutical companies increases. However, the issue of energy remains important and, with the planet entering a financial crisis, this trend takes first place.

Towards the end of the 2000s and the beginning of the next decade, consumption reemerged strongly, as did interest in the services of a large, powerful global bank, perhaps due to the doubts that the preceding crisis had created about the banking system.

A few years earlier

The growth that followed, particularly in the US after the crisis and recession of 2007-09 and to a lesser extent in Europe and the rest of the world, kept values roughly in the same categories until the onset of the pandemic.

Fears of a possible recession, uncertainty, and the need for everyone to adapt to the lockdown changed the value system almost completely. Fuel and energy—helped by the energy crisis that began in 2021—took first place, but personal computers, laptops, high-capacity smartphones, and technology services in general were the main "value" issue.

Seven out of ten of the world's most valuable companies belonged to this category. Investments, either in the form of collective investments or with the help of investment banks, also gained interest. Once again, it was proven that the issues that concern us are linked to our behaviour, which in turn leads us to actions that shape values.

Today

Our smartphone is an essential tool. It is also an accessory, something like a watch or a handbag, indicative of our status and the "group" we want to belong to.

In the years we examined, the car found itself in this position for the first time now that the trend toward electric vehicles is particularly strong. Also, it is not a question of having a computer—we all have more than one, as well as tablets—the question is whether we have our computer updated and with the right applications. We also search for information on everything and shop online.

The pandemic may have helped here, but it is clear that consumer goods and food chains have not been among the top values for over ten years. Consumerism is back for good, as is interest in all digital services.

Social networks, online services (banks, investments, insurance, food, dating), and with them the importance of our digital security are very high on the list of values. Medicines remain among the important values. With a shift towards biotechnology and modern discoveries, however, they continue to do the same job.

Some final thoughts

Note a percentage: 82%. This is the percentage of capitalisation among the ten largest companies that belongs cumulatively to technology companies in the broadest sense. Globally, the corresponding percentage is 23%. Have we overestimated their value? Do we believe that this situation will remain stable forever (fallacy of the present state) or, because we have acquired products, shares, and bonds from these companies, do we believe that they are worth more? Time will tell. What the past has shown us is that there is no stability for long periods of time.

That major social trends are reflected in global market values. That recession makes us more conservative and rising values lead us to consume. That for more than forty years now, people have taken food and water for granted, while considering energy to be of high value. The truth, as always, is more complex.

Energy is needed everywhere, obviously for food production and water distribution, a better standard of living is "measured" by more products, in difficult times we adapt, and many services have shifted from physical to digital distribution. The numbers tell the truth, but they also tell little lies. The difference will be made by our critical thinking and analysis.