Final yr was a busy yr for the markets. It included macro occasions like tariffs, synthetic intelligence (AI) and the rising dominance of U.S. tech firms attracting ever extra world retail traders. That, in flip, led to ongoing progress of off-exchange buying and selling and plans for 24-hour buying and selling — each of which make a greater Nationwide Greatest Bid and Provide (NBBO) much more vital.
At present we have a look at my 10 favourite charts from 2025.
1. Inventory markets are good for the financial system
You may suppose it’s apparent that inventory markets are good for the general public. Accounting statements make it simpler for extra traders to effectively worth firms and allocate capital, and that capital permits firms to increase, construct new factories or merchandise, and rent extra staff. Traders additionally personal a share of the returns every firm earns.
However final yr we discovered a variety of new information factors that assist that instinct.
- One chart from this weblog exhibits that international locations with excessive ranges of direct possession in shares – just like the U.S., Sweden and Australia – additionally are likely to have increased valuations. That’s good for firms because it reduces their prices of capital, making extra investments much more seemingly.
- This ties with a WFE paper that we additionally referenced, that discovered international locations that can develop their fairness markets lead to stronger GDP progress.
- In that very same weblog, we additionally confirmed that shares do enhance investor wealth greater than most different property over the very lengthy run, making them an vital component of wealth creation.
What we see is that the entire ecosystem is vital — public entry to firms, public curiosity in firms, clear costs and accounting information to make valuations simpler, and firms enthusiastic about going public. Altogether, inventory markets make economies and family funds stronger.
Chart 1: Nations with extra fairness possession have increased inventory valuations
2. Markets assist firms finance in many alternative methods
Talking of firms elevating capital and distributing returns again to their traders…
We confirmed SIFMA information highlighting that, as thrilling as preliminary public providing (IPO) day is for an organization and traders, IPO proceeds raised are a fraction of all capital raised by the U.S. inventory market annually. For instance, in 2024:
- IPOs raised a complete of $30 billion.
- Secondaries raised virtually $170 billion.
Chart 2: Corporations faucet inventory markets for hundreds-of-billions of {dollars} of finance annually
The identical weblog confirmed that firms return even extra again to traders via two primary methods:
- Buybacks: In response to the Wall Avenue Journal, firms spend round $1 trillion annually on buybacks. That’s considerably greater than the worth of main and secondary finance raised mixed. Apparently, the information additionally exhibits buyback finance is concentrated, with the highest 11 firms accounting for nearly half, or $500 billion, of introduced buybacks – and buyback values rise and fall with the energy of earnings and the financial system.
- Dividends: Add to round $1 trillion annually, though the information additionally exhibits dividends are way more constant over time.
3. Shares don’t alter 100% for the worth of a dividend
Whereas we’re speaking about dividends…
You may count on the worth of an organization to say no by precisely the quantity of a dividend — in any case, the firm’s steadiness sheet is decreased by precisely that a lot when the money is paid to traders.
In our evaluation, we discovered that inventory costs do alter instantly after a dividend hits “ex-date” (Chart 3).
Nonetheless, the median inventory decline was solely round 90% of its dividend quantity. The more than likely final result is a drop even much less than that.
Apparently, an affordable share (about 20%) of shares see costs enhance on ex-dividend date — even after accounting for the market strikes in a single day. That’s seemingly as a result of different information is much more vital to the long run worth of the corporate than the quantity of the dividend paid, even when it’s information that causes the entire market to rally.
Chart 3: Inventory costs fall when dividends go “ex-date,” however by lower than the worth of the dividend
4. U.S. AI shares appeal to world traders, at the same time as earnings broaden
Largely, firms pay dividends as a technique to share firm income with traders.
The third-quarter earnings season confirmed earnings broadening considerably – a wholesome signal heading into 2026. Extra firms, throughout extra areas of the financial system, are returning to earnings progress. The proportion of firms beating expectations has additionally been rising. In Q3, it reached the best degree in at the very least 16 years, in response to Barclays Analysis.
Regardless of the broadening of earnings, the main focus final yr was on the costs and earnings of AI, or “hyperscaler,” firms. One factor began to alter in 2025: AI firms’ earnings began to ship on expectations already priced into the shares after many of those firms reached trillion-dollar market caps. The truth is, in 2025, we noticed their inventory costs climbing much less shortly than their earnings, ensuing within the PE ratio of the most important AI firms truly falling (chart under).
Chart 4: Hyperscaler earnings rising sooner than inventory costs, resulting in falling PE ratios
5. Markets head towards 24-hour buying and selling
AI shares are predominantly U.S. firms.
One consequence of the stellar efficiency of those firms has been to make the U.S. inventory market fashionable for traders all all over the world.
As Asian traders appeared to purchase U.S. shares within the AI area, throughout their daytime, U.S. in a single day volumes in shares elevated. Consequently, the funding group pushed for exchanges to function U.S. inventory markets 24 hours a day – just like Futures and FX and Crypto markets. One key purpose for that is that a number of the protections out there to traders through the day (like an NBBO) could possibly be utilized to in a single day trades, too.
Shares work a bit of in another way than these different asset lessons although. For a begin, settlement is “netted” on T+1, making the commerce date vital. Shares even have company actions (like dividends and splits) that require the order e-book (bids and presents and share portions) to be corrected earlier than buying and selling restarts, in order that buying and selling stays honest and environment friendly for arbitrageurs and traders.
Though the transfer to 24-hour buying and selling has began, inventory markets have determined they want time every day to make these changes and swap to the following day.
Apparently, our information exhibits that there’s a interval from 4 p.m. Jap Time to virtually 10 p.m. Jap Time, the place few markets on the earth are open (though New Zealand opens first, bigger markets like Japan and Korea open round 8 p.m.). CME’s Globex Futures market takes benefit of this and pauses every night time from 5-6 p.m. Jap Time — though quantity information exhibits shares volumes are nonetheless elevated at the moment, making it too early to pause inventory markets.
Chart 5: As we head towards 24-hour inventory buying and selling, when ought to the day finish?
6. Earnings shares are energetic in after-hours buying and selling
Whereas we’re taking a look at buying and selling after the shut, it’s attention-grabbing to analyze which shares are buying and selling.
Once we analyzed after-hours buying and selling, we discovered that many shares not often commerce after hours in any respect. The breadth of buying and selling exercise drops drastically exterior core hours.
- Even throughout essentially the most energetic extended-hour interval – from 4-8 p.m. – solely 4,354 shares (38.5% of the entire listed securities) usually commerce greater than $10,000 in worth.
- Throughout in a single day hours, the quantity drops additional, with solely 644 shares per day seeing greater than $10,000 worth traded. The truth is, just one,403 shares usually see any trades, highlighting the focus of exercise in a single day.
As well as, because the chart under exhibits, shares with earnings make up an outsized proportion of these energetic shares. Information exhibits that, on the day every firm pronounces earnings, the mixed volumes of earnings shares can account for 10%-20% of all worth traded within the after-hours interval.
Chart 6: Shares with earnings are a big element of after-hours exercise
7. If NBBO is vital, market economics have to assist it
One factor evident from traders and merchants’ calls for over time is that NBBO is vital. Efforts to restructure the SIP, shrink spherical heaps, cut back ticks, increase 605 to institutional traders, and get exchanges to function 24×7 are all designed to make the NBBO higher and out there to guard extra traders.
However NBBO costs aren’t charity. The merchants publishing lit costs on exchanges are hoping to seize unfold. The unfold that they quote will rely on the revenue they make from unfold seize.
It follows that if we would like tighter spreads, we should always reward unfold seize extra.
Chart 7: Aggressive NBBO is determined by merchants capturing spreads
In that mild, different tendencies within the business are doing the other.
- Fragmentation of lit venues makes it tougher for a dealer to be on the high of the “proper” queue and seize unfold.
- Segmented markets filter worthwhile spread-crossing orders away from merchants setting the NBBO, growing the opposed choice on the NBBO.
- The pending discount of rebates allowed will materially cut back the economics of offering liquidity on the NBBO.
- The potential elimination of the Order Safety Rule can also be unlikely to profit NBBO setters.
8. U.S. markets turning into more and more darkish
Highlighting the purpose above is the truth that a lot of the U.S. inventory market is now greater than 50% off-exchange (or “darkish”). Excluding open and shut, that’s nearer to 70%.
Lecturers have for years thought that the 50% degree represents a “tipping level,” the place the NBBO not rewards worth setters and worth discovery degrades.
And the information exhibits that it’s not simply “low priced shares that retail trades”. Massive cap and even ETFs commerce near 50% off-exchange, too.
Chart 8: Virtually all forms of shares are near 50% (or extra) off-exchange now
9. Smaller spherical heaps repair a part of the odd-lot downside
To be honest, modifications are being applied to make the NBBO higher. One which went into place late in 2025 addressed a part of the “odd-lot downside.”
Beforehand, all shares wanted to have 100 shares bid or supplied to depend for the NBBO. For a $1,000 inventory, that was a big place and threat for a worth setter (100 shares x $1,000 = $100,000) in an period when spreads are simply 1-basis level (0.01%) for a lot of sticks and commerce measurement is nearer to $10,000.
The change made spherical heaps smaller for shares over $250.
Importantly, though this variation affected round 250 symbols (solely 3% of listings), because of the truth that excessive priced shares are sometimes the most important and most liquid firms, this represents:
- 23% of the S&P 500 constituents.
- 38% of all worth traded within the Nasdaq-100® (though solely 17% of the shares traded).
- 36% of all worth traded within the S&P 500.
Wanting on the information after the change, these new spherical heaps labored as anticipated. The market tailored to them and their new economics immediately –
- Spreads fell.
- Depth fell.
- Odd heaps (nonetheless) steadily set a tighter unfold contained in the unfold.
Which means there are nonetheless “too many ticks” inside these new spreads. Nonetheless, this early information exhibits (purple line) that though these shares should not at their “optimum” unfold – the U-shape is undoubtedly flattened for increased priced shares. The truth is, now the NBBO resents to a $10,000 quote extra steadily at increased inventory costs, we see all of the shares priced above $250 buying and selling extra like shares within the $150-$250 (and 100-share spherical lot) group.
We additionally notice that the tighter odd lot spreads (yellow) will even seemingly be quickly added to Rule 605 experiences.
Chart 9: Smaller spherical heaps let to higher NBBO (though nonetheless not optimum spreads)
10. There is no such thing as a silver bullet for optimum market construction
We have now traveled via lots of the subjects that mattered in 2025, together with:
- Macro and the way vital markets are for traders, firms and the U.S. financial system.
- Defending traders and serving to enhance the monetary safety of U.S. households.
- How microstructure issues.
To be honest, making markets superb simply by altering the market construction isn’t simple. That’s one thing that our weblog evaluating market buildings of U.S. to Canada and Europe discovered. As an alternative, we noticed that there’s no silver bullet for optimum market construction. It is arduous to:
- Encourage innovation, whereas on the identical time guaranteeing economics rewards a aggressive NBBO.
- Cut back fragmentation prices whereas sustaining competitors.
Nonetheless, the information confirmed that market construction and the microeconomics of buying and selling make a distinction. For instance:
- Canada has a far much less fragmented market than each the US and Europe (Chart 10).
- Europe has essentially the most degree tick regime.
- Though the U.S. has essentially the most liquidity (at the very least till in contrast to Asia, which additionally has vital liquidity from their retail traders).
Chart 10: U.S. markets are essentially the most fragmented
Making inventory markets higher can profit traders, firms and the financial system
Generally, wanting backward and understanding the successes and failures of historical past helps us make higher choices sooner or later.
That is very true for inventory markets. Information exhibits that macro- and microeconomics of inventory markets matter. And profitable inventory markets profit traders, firms and the financial system.
One key good thing about inventory markets over different asset lessons is the competitively priced NBBO. That ensures environment friendly asset allocation and low buying and selling prices for traders.
A market that’s too fragmented or segmented makes buying and selling tougher. Spreads develop into costlier. And each add to the prices of capital for firms, which reduces the attraction of being a listed firm.
A market that’s optimally environment friendly, defending traders at low prices, will assist develop the U.S. financial system, finance investments and add to jobs. And when markets can be found to the general public, that’s one thing we are able to all be proud to contribute to.
