For those following the S&P500 (SPY) or the Nasdaq-100 (QQQ), this trend is invisible; after all, those indexes always carry 500 and 100 companies, respectively. Yet, in the broader a large trend has been at work ever since the year 2000.
The trend, as illustrated by the SEC Data Guy in the chart below, is as follows: there are fewer and fewer companies filing 10-Q forms year after year. That is, there are fewer and fewer quoted companies as time goes by.
This is hard to ignore, it paints a picture of a deep reduction (around -37% from the top) in distinct filers. The market is getting smaller by the day. Be it bankruptcies, mergers & acquisitions or the simple lack of a bristling IPO market, the picture isn't rosy.
The trend towards heavy indexation or closet indexation also can't help. It deprives the smaller companies of liquidity and interest, perhaps leading more of them to remain private.
Will this trend reverse?
For now, it seems hard to. The peak in IPOs back during 2000 was filled with low quality tech companies, and once again in the recent months the market received an influx of high-multiple dubious prospects. This seems connected to the way VC companies are shooting for the stars instead of pursuing more down-to-earth opportunities that could make for smaller but safer companies. Felix Salmon has a take on this phenomenon, in his article "How The IPO Market Is Broken".
The phenomenon makes for huge competition to invest and bring to market companies like Facebook (FB) or Groupon (GRPN), companies that promise to change the world but carry lofty multiples and at times, high risk. And much less interest in building a stream of smaller, profitable, mundane, companies that would replenish the market's numbers.
On the other hand
The combination of these trends might also spell a lack of interest in microcap, smallcap and sometimes even midcap companies. That lack of interest will play into the value investor's hands, and he will see less competition in trying to unearth diamonds from the market's now less vast coal fields.