In truth, millions of Americans cannot feel the stock market boom.
“To hold the stock market as the barometer of the evolution of the middle class is totally wrong – and very misleading,” Edward Wolff, a professor in New York who has studied share ownership and inequality, told CNN Business.
Trump argued that the sharp rebound in the stock market is not just helping “grown-ups”.
“It affects everyone, it affects a person who owns $ 10,000 in stock in IBM or whatever,” Trump said at mayoralty.
But wealthy Americans have a lot more skin in the stock market. This means that when stocks increase (or decrease), the impact goes disproportionately on the wealthiest families.
The middle class, defined as households with between 20% and 80% of wealth, held only 6.6% of outstanding shares, according to Wolff’s study.
“The performance of the stock market is so out of touch with the economic experience of the vast majority of Americans – especially the middle class,” Wolff said. “Most Americans don’t really have much interest in the stock market.”
The S&P 500 is not Main Street
In any case, the stock market is not – and never has been – the economy.
The S&P 500 is not a proxy for Main Street. It represents the fortunes of some of the world’s largest companies, those with the most resources to weather a crisis.
Sometimes the stock market can feel completely out of touch with the fundamentals of the real economy.
The trust factor
Investors also tend to smell an economic recovery long before Main Street can feel it.
Whatever the catalyst, Wall Street’s rapid recovery has significant advantages.
The fact that the S&P 500 has soared more than 50% since the March 23 low helps inspire confidence in C-Suite executives. And that confidence can inspire more hiring and spending in research and factories that boost the real economy.
Likewise, consumers – especially those with large amounts of inventory – can learn from the market. While collapsing markets can pull Americans back, headlines on record stock prices can do the opposite. Consumers who are more confident may choose to spend more money on iPhones, home repairs, or vacations. And this has a real economic advantage.
Black households own only 1.6% of shares
Yet stocks are a particularly poor indicator of the financial health of average Americans, especially racial minorities.
Black households own just 1.6% of stocks and mutual funds, according to the Fed. Hispanic families owned the same amount. By comparison, white households control 92% of stocks and mutual funds, the Fed said.
There is also a deep divide in the educational spectrum.
Americans with no college education own just 5.4% of stocks and mutual funds, according to the Fed. This is down from nearly 17% in 1989.
All of this means that the stock market boom is amplifying the inequality divide that has helped fuel the unrest in the United States in recent months.
“It widens the gap between the upper groups and those in the middle. It exacerbates inequalities in wealth,” Wolff said.
That’s why the next president is unlikely to tie into the vagaries of the stock market to the extent that Trump has.
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