The world’s financial assets—including stocks, bonds, and other instruments—now total more than $140 trillion and are on pace to reach $214 trillion by decade’s end. Moreover, the value of the world’s financial assets now exceeds global GDP by a factor of three—an unprecedented degree of financial depth that largely bodes well for the world’s economies. Deeper financial markets promote a more efficient allocation of capital and risk and offer households and businesses more choices for investing savings and raising capital, respectively.

The roles that countries and regions play in the world’s capital markets are changing. While the United States remains the largest financial market, the eurozone¹ has emerged as a financial powerhouse; indeed, the eurozone, the United Kingdom, and the United States account for some 80 percent of all cross-border capital flows. By contrast, Japan is strikingly isolated: its capital flows are smaller even than China’s, although China’s stock of financial assets is only one-quarter the size of Japan’s.

These are among the findings of the McKinsey Global Institute’s comprehensive study of the global capital markets. (For more detail, see the original report, $118 Trillion and Counting: Mapping the Global Capital Markets, available free of charge online.) This effort—the third in a series begun in 2003—tracks the financial assets of more than 100 countries since 1990. In 2006 we added new data on cross-border capital flows. Understanding the evolution of the world’s capital markets is important for institutions hoping to shape them, for executives seeking to raise money on them, and for policy makers who regulate them. The exhibits that follow outline the way capital markets around the globe are becoming stronger, more liquid, and increasingly integrated.