5 Largest Investment Firms Control more than $18 Trillion in Assets, 85% of US GDP

by Justinas Baltrusaitis

The leading investment firms continue to control a large pool of assets, in return contributing significantly to the general economic growth. By the first quarter of 2020, the top five investment companies had combined assets that amounted to at least three-quarters of the US Gross Domestic Product (GDP).

Data gathered by Buyshares.co.uk shows that the five largest investment firms by assets managed accounts for 85.44% of the US Gross Domestic Product. According to the data, the five leading investment firms Fidelity, Charles Schwab, Morgan Stanley, Wells Fargo, and TD Ameritrade control assets worth $18.37 trillion to account for 85.44% of the United States GDP of $21.5 trillion as of June 2020.

By the first quarter of 2020, Fidelity controlled assets worth $8.3 trillion, representing 38.6% of the GDP. Charles Schwab controlled the second-highest assets worth $4.05 trillion or 18.84% of the United States GDP. Morgan Stanley’s current assets account for 14.41% at $3.10 trillion. Wells Fargo has the fourth-highest assets at $1.6 trillion representing 7.4% of the current United States GDP. TD Ameritrade has the fifth-highest assets at $1.32 trillion or 6.1% of the GDP.

Buyshares.co.uk’s research also overviewed the United States Gross Domestic Product from the first quarter of 2019 to the first quarter of 2020. From the data, the GDP fell in the first quarter of 2020 to $21.53 trillion. It dropped by 0.89% from $21.72 trillion recorded in the fourth quarter of 2019.

From the first quarter of 2019, the GDP has been rising until it hit a low this year. After the first three months of 2019, the GDP stood at $21.09 trillion and rose to $21.34 trillion in the next quarter. By the third quarter, the GDP rose by 0.9% to $21.54 trillion in the next quarter.

Coronavirus pandemic slows down US economic growth

The drop in the United States GDP in the first quarter of this year can be attributed to the effects of the coronavirus pandemic. The pandemic has resulted in a human and economic hardship across the United States. For example, from mid-March, over 26 million Americans filed for unemployment with the US witnessing historic declines in business activity and consumer confidence.

The impact on the economy could have hit the extreme levels if the Federal government had not intervened and cushioned the economy with at least $3tn stimulus packages and business support measures. Furthermore, The Federal Reserve lowered interest rates to near zero in a bid to cushion the economy.

In the coming months, the economy is expected to continue showing signs of recovery considering that reopening measures are being implemented. The Federal Reserve has maintained that the near-zero interest rates will stick in place until there are signs of recovery.

Already, there are signs of recovery in recent weeks. Share prices have increased in recent weeks following historical lows early this year. The gains in stocks can be linked to government intervention.

Role of investment firms in US economic growth

Fidelity’s large asset pool can be attributed to the several businesses it operates. The main businesses include mutual funds and brokerage services. The mutual fund division comprises three divisions like equity, high-income, and fixed income divisions. The company operates Fidelity Contrafund, the largest non-indexed mutual fund in the United States.

Overviewed investment firms play a major role in the economic growth of the United States. The investment directly influences economic growth since it is a component of aggregate demand. Furthermore, it influences the productive capacity of the economy.

In most cases, investments from these firms are long term plans which enable companies to generate revenue for many years by adding or improving production facilities and boosting operational efficiency. An increase in investment also gives room for more research and development in the capital structure. Lastly, additional investments intend to increase labor productivity by making companies more productive and efficient. Basically, investments by these firms lead to high productivity and thus to economic growth, returning money to the beginning of the cycle.

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