The running of the bulls in 2023 was more like the waddle of the fat cats
"There you go, Nick Hanauer told us years ago that it wasn't the wealthy like him who create jobs, but Investors grew fearful that weak consumer sentiment could lead to a pullback in Americans’ shopping habits. Consumer spending makes up more than two-thirds of the US economy."
And what will Trump's tariff taxes do to consumer spending. The best possible positive i see in Trump new trade deals (far short of his bigmouth blowhard 90 in 90 days) is if increased bring higher paying jobs back to the USA. If...
By Irina Ivanova Deputy US News Editor January 13, 2024 at 5:00 AM EST
A record low amount of Americans hold the lion's share of stock market wealth. Getty Images
Meow. That’s the sound of 2023’s bull market getting swallowed up by the fat cats that make up the vast majority of stock-market wealth. How vast? Try a record 93% of value owned by the wealthiest 10% of society, according to no less an authority than the Federal Reserve.
It puts a different spin on the intense bull run that equities went on dating back to spring 2020, with the S&P 500 more than doubling in value, rising from 2,304 in March 2020 to close at 4,769 on the last trading day of last year. That figure even factors in the market slipping into a bona fide bear market in 2022 amid surging inflation and the souring of pandemic darlings, for instance the “crypto winter” and the end of meme-stock mania.
These figures are all the more remarkable considering that they are not equivalent to ratios of stock ownership. In fact, the number of Americans who hold any stocks at all also hit a record, with 58% of all Americans invested in equities in some form, also according to Fed data. This means that many of us own stock, but only the top 10% have truly valuable holdings.
The figures are a reminder that the rising tide of the past year hasn’t necessarily lifted all boats, revealing that even as the ranks of retail investors swelled, the surge in stock values accrued overwhelmingly to the top.
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That’s a function of basic math. The 84% rise in the S&P 500 since the depths of 2020 is worth a lot more in dollar terms when it’s applied to a starting amount of $100,000 than to a retail investor who’s putting in $2,000.
“The higher up the income ladder you go, the more likely someone owns assets like stock and retirement accounts, and also, on average, the more they will have,” said Steve Rosenthal, a senior fellow at the Tax Policy Center. “The rich will have mega accounts, including mega IRA accounts, and the middle class and poor may own some stock, but it will be very little.”
The average equity holdings of the wealthiest tenth, which in 2022 included households worth $1.9 million or more, was $608,000 — a figure that includes stock held outright as well as shares in retirement or mutual funds. Meanwhile, the poorest half of Americans (households with a net worth $192,000 or less) typically had stock holdings worth just $12,500.
Even within the richest sliver, nearly all the growth in stocks has gone to the top 1%, said Chuck Collins, who directs the inequality program at the left-leaning Institute for Policy Studies.
Two decades ago—in the wake of the dot-com bust—the wealthiest 1% held 40% of the wealth in public markets; today, their share is 54%.
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And Collins believes that’s by design. The policies of the past decade “have encouraged asset growth and discouraged wage growth,” he said. “As much as wages have gone up, the rules of the economy have been tilted to asset owners at the expense of wage earners.”
In his view, and in the belief of many progressive economists, the impressive stock gains of the past few decades are directly tied to policies that reduce how much money people can earn in other ways, including wages, pensions, and taxes that can redistribute gains from the richest to the poorest.
There's “tax cuts and tax avoidance at the very top, and very low minimum wages that don’t reflect the productivity gains among average workers,” Collins said. Since the late 1970s, even as American workers got more productive, their pay fell far behind the value they were contributing, a shift that coincided with the popularity of the Friedman doctrine, which held that corporations’ only purpose was to make money for shareholders.
Since the late 1970s, Collins notes, “the productivity gains have mostly gone to equity, and to stockholders.”
More classically liberal (as in Adam Smith) proponents of free markets argue this is a good thing: Long-term, equity markets have provided the best return of any asset class, and encouraging broad participation in these markets is one way to spread prosperity widely, goes the argument. It’s the thinking behind, for instance, the rise of 401(k) plans in the place of pensions, and George W. Bush’s philosophy of an ownership society — people can have better results managing their own money than if they expect society to provide it for them.
But today’s markets are far narrower than they once were, and not just in terms of ownership. The stock market’s 20% rise this year has been fueled by just a handful of superstar companies. The so-called magnificent seven have a market cap equal to the stock markets of Canada, Japan and the United Kingdom, Apollo Chief Economist Torsten Slok noted this month .. https://apolloacademy.com/how-overvalued-are-the-magnificent-seven/ .
This type of concentration discourages participation by boosting the most successful stocks above the level many investors can afford. And the era of “easy money,” as ultra-low interest rates were derisively called, allowed many firms that would have formerly floated on stock exchanges to sell to private equity, shrinking the total number of companies that are publicly traded—by more than 40% since the mid-1990s. (To their credit, commentators such as economic historian Edward Chancellor decry the distortions from such abundant capital.) Likewise, the current state of the market, in which 1% of Americans control more than half the stock-market wealth, offers another perspective on the pandemic’s economic boom, and why an economy that’s strong in the aggregate is leaving many people cold.
“The whole idea that there's this democratization of the markets is way overhyped. 93% of all assets are in the top 10%— I don’t know what kind of democracy you’re living in,” said Collins. “The four-decade-long wealth surge to the top is basically continuing.”
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About the Author Irina Ivanova Deputy US News Editor
Irina Ivanova is the deputy U.S. news editor at Fortune.
The US stock market does better under Democrat presidents than Republicans – here’s what the data shows
"There you go, Nick Hanauer told us years ago that it wasn't the wealthy like him who create jobs, but Investors grew fearful that weak consumer sentiment could lead to a pullback in Americans’ shopping habits. Consumer spending makes up more than two-thirds of the US economy. that consumers create jobs. There you have it, more than two thirds of the economy."
Published: January 29, 2025 4.35am AEDT Author Paul Whiteley Professor, Department of Government, University of Essex Disclosure statement Paul Whiteley has received funding from the British Academy and the ESRC. Partners University of Essex University of Essex provides funding as a member of The Conversation UK.
Republish our articles for free, online or in print, under Creative Commons licence.
The US has been experiencing a long “bull” stock market, that is rapid growth in stock prices, although this week tech stocks tumbled over the future prospects for US-built AI.
But could the market hit a significant downturn during Trump’s second term in the White House? At first sight this seems unlikely because it did well during his first term, from 2016 to 2020 (see chart below). However, long term trends in the US stock market reveal a pattern suggesting that stock prices might be quite vulnerable during his second term.
The Nobel prize-winning economist, Robert Shiller, who studies financial markets thinks that the US stock market has peaked, and future returns will be much more modest than in recent history although he does not suggest that a crash is on the horizon.
The market under different presidents
Shiller’s data makes it possible to look at the relationship between who is the president and stock prices since 1925. By examining the performance of the stock market over that period we can identify the extent to which eight Democrat and nine Republican presidents have influenced the growth of the market.
Changes in stock prices during Republican presidents 1925 to 2024:
Author provided (no reuse)
The chart shows the percentage changes in the Standard and Poor’s monthly stock price index (which gives a snapshot of the market), corrected for inflation, during the incumbencies of Republican presidents since January 1925.
The average increase in stock prices for Republican presidents was 25%. But the thing that stands out in the chart is that three major crashes in the stock market also took place under these Republicans incumbents.
The first of these, known as the Wall Street Crash, occurred on October 28 1929 when Herbert Hoover .. https://www.britannica.com/biography/Herbert-Hoover .. was president. This was the trigger event for the Great Depression of the 1930s and resulted in a fall of 64% in the stock market during his presidency.
His reaction to the crash (when share values fell dramatically) was to do nothing in the belief that the economy would eventually recover on its own. This cost him the 1932 presidential election when Democrat Franklin D. Roosevelt was elected for the first time. He was subsequently elected a record four times, thanks to his New Deal policies for dealing with the crisis.
The second crash occurred during Richard Nixon’s incumbency .. https://www.britannica.com/biography/Richard-Nixon . He would have been impeached by Congress had he not resigned in August 1974 following the revelations of the Watergate scandal.
This occurred when the White House employed burglars to break into the Democrat party headquarters in the Watergate building in Washington DC. Once Nixon’s attempt to spy on his opponents became public he was forced to resign and overall the stock market fell by 47% during his incumbency.
The third crash occurred in December 2007 when George W Bush .. https://www.britannica.com/biography/George-W-Bush .. was the president. It had its origins in the deregulation of the financial sector which had occurred in the US after Ronald Reagan became president in 1980. Lax financial regulations led to ever increasingly risky assets and trading practices on Wall Street starting in the real estate market.
The crisis spread rapidly throughout the world’s financial system and a recession of the scale of the 1930s was only averted by prompt action by the Federal Reserve chairman, Ben Bernanke .. https://www.nytimes.com/2022/10/10/business/bernanke-fed-crisis-nobel-economics.html , who worked with political leaders in other countries such as UK prime minister Gordon Brown to stabilise the system. The stock market fell by 45% during Bush’s period of office.
Changes in stock prices during Democratic presidents 1925 to 2024:
Author provided (no reuse)
The second chart shows changes in stock prices during the incumbencies of eight Democratic presidents during this period. It is very different from the Republican chart, since, of those presidents shown, only Jimmy Carter left office with the stock market lower than when he arrived, and that by a modest 13%.
Bill Clinton was the most successful president, achieving an increase of 151% during his two terms in the White House. Overall, the stock market rose by an average of 51% during Democrat incumbencies, more than twice the size of the Republican increases.
These results are surprising given that the Republicans are the traditional party of big business and so might be expected to be good for the stock market.
Donald Trump has promised to increase tariffs on imports from the rest of the world, particularly those from China. In addition, there is a burgeoning budget deficit caused by the gap between spending and taxation.
Most economists think these policies will create inflation and slow growth.
Recent comparative research shows that countries can pay a high price for populist economic policies. So, it would be well worth Trump studying the history of US stock markets rises and falls, if he wants to avoid a severe economic downturn during his second term.
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