Analyst: Aging U.S. Stock Market's 'Epic New Issue Drought' Signals Strong Returns
While North America's population grays, its stock market is following a similar aging trend, according to recent analysis. Economist Owen Lamont of Acadian Asset Management reveals that by certain metrics, the age of the U.S. equity market is approaching historic highs.
The Aging Mechanism: Declining IPOs
Markets age much like human populations—through a lack of new entrants. For markets, this means fewer initial public offerings (IPOs). Lamont notes that IPO numbers in U.S. markets have been declining since 2000, leading to increased founding and listing ages for companies.
Microsoft Corporation, founded in 1975 and listed in 1986, exemplifies this trend, representing the cap-weighted U.S. market in both its listing age and founding age at IPO.
Measuring Market Age: New Issue Weight
Another critical metric is new issue weight, which measures the percentage of a stock market's total capitalization with a listing age under three years. When this weight rises, it indicates a younger market as new entrants join or recent outperformers emerge.
As of November 2025, the market's new issue weight stood at just 1.3%, significantly below the historical average of 4.6%. This low figure reflects the scarcity of firms going public over the past three years and their generally low valuations.
Lamont describes this rapid decline in new issue weight as "striking", even when accounting for the growing influence of private markets. He emphasizes, "It's not just that we don't have a new issue wave; what we have is an epic new issue drought."
Should Investors Worry About a 'Geriatric' Market?
With the market aging, concerns about potential decline might arise. However, Lamont advises against panic. "Should you dump U.S. stocks and shop around for a younger market? No," he asserts.
Contrary to human aging, where rising age often signals decline, Lamont's analysis suggests that for equity markets, a lack of young firms can indicate high future returns. He states, "Based only on its age, today's geriatric market is a screaming buy."
Historical Patterns: New Issue Waves and Returns
Lamont's research, covering data from 1929 to 2001, reveals that markets overweight with new listings tend to yield low returns. "Markets with many young firms tend to be overvalued, because private firms rush to go public to take advantage of high equity prices," he explains.
Examples of new issue waves that proved unfavorable for investors include:
- The 1929-30 rush, peaking at a new issue weight of 14%
- The tech bubble wave, exceeding 12% in 2000
- A smaller surge in 2021, which Lamont notes was "a bad time to buy stocks"
Conversely, periods with lower new issue weights than today—such as 1934 and 1976 to 1978—were times when the U.S. stock market was "dirt cheap," according to Lamont.
Private Markets and Future Predictions
One factor contributing to the IPO drought is the expansion of private markets, allowing firms to remain private longer. Lamont acknowledges this might reduce the reliability of new issue weights as predictors, noting that unlike the 1970s, today's market does not appear cheap.
Despite this, his analysis suggests that the aging U.S. stock market, characterized by its "epic new issue drought," may paradoxically signal robust investment opportunities ahead, challenging conventional worries about market decrepitude.
