Trump Touts Stock Market’s Record Run, but Who Benefits?

Donald Trump loves to trumpet the hot U.S. stock market as a key achievement of his presidency, and he was in full self-congratulatory mode on that front during Tuesday night’s State of the Union address.

“All of those millions of people with 401(k)s and pensions are doing far better than they have ever done before with increases of 60, 70, 80, 90 and 100 percent and even more,” Trump said in his address to a joint session of Congress.

While pensions and retirement funds were lifted by the rise in stock markets, the president has avoided talking about one key point about who really benefits when the market rallies: Most of the gains go to the small portion of Americans who are already rich.

That’s because 84% of stocks owned by U.S. households are held by the wealthiest 10% of Americans, according to an analysis of 2016 Federal Reserve data by Edward Wolff, an economics professor at New York University. So when the stock market has a blockbuster year – such as the nearly 30% rise in the S&P 500 benchmark index in 2019 – the payoff primarily goes to people who are already rich.

“For most Americans, a stock price increase is pretty immaterial to their well-being,” said Wolff, who published a paper about wealth inequality in the National Bureau of Economic Research in 2017.

Roughly half of Americans own some stocks through a brokerage account or a pension or retirement fund. But for most people, the exposure is too small for market gains to be life-changing or leave them feeling much better about their finances, Wolff said. “They’ll see a small increase in their wealth, but it’s not going to be anything to write home about,” he said.

Graphic: The stock boom’s unequal gains png, https://fingfx.thomsonreuters.com/gfx/editorcharts/USA-TRUMP-SPEECH-STOCKS/0H001R898BRM/eikon.png

What’s more, nearly 90% of families who own stock do so through a tax-deferred retirement account, meaning they can’t access the money until they reach retirement age, unless they pay a penalty, Wolff said.

So who owns most of the stock market? The majority of corporate equities and mutual fund shares are held by investors who are white, college educated and above the age of 54, according to an analysis from the Center for Household Financial Stability at the Federal Reserve Bank of St. Louis.

The typical middle-class family gets the bulk of its wealth from the housing market. Households in the middle three quintiles of wealth held 61.9% of their assets in their principal residence in 2016, according to Wolff’s analysis. That compares to households in the top 1%, who held 7.6% of their wealth in their homes.

Because most consumers accumulate the majority of their wealth through their homes, a rise in property values can provide a more substantial boost to household wealth than a stock market rally, said William Emmons, lead economist at the St. Louis Fed’s Center for Household Financial Stability.

Still, the recent revival in the housing market, spurred in part by the Federal Reserve’s interest rate cuts, is not helping all Americans equally. Rising property values benefit homeowners but make it harder for aspiring home buyers to break into the market, said Eugene Steuerle, co-founder of the Tax Policy Center, a joint venture between the Urban Institute and the Brookings Institution.

And some people who bought homes immediately before the recession hit may still be trying to recover their losses, Steuerle said. Their wealth may have been wiped out by foreclosure, meaning they then struggled to qualify for a new mortgage during the recovery, he said.

That’s in sharp contrast to well-off investors, whose overall wealth surged after the crisis thanks to strong returns on stocks, property and other investments. Some 72% of wealth accumulated between the third quarter of 2009 and the third quarter of 2019 went to the richest 10% of households, according to an analysis by Oxford Economics. Over that same time period, the poorest 50% of households reaped only 2% of wealth gains.

“There are a lot of families that have not yet recovered from the financial crisis,” Emmons said.

Some more evidence that the recent stock market boom is not making everyone feel richer: There has been little evidence of the “wealth effect,” which says that people tend to spend more when stock markets are up, said Lydia Boussour, a senior economist for Oxford Economics.

Since the recession, people have mostly continued to increase their savings even as the stock market rose. “Consumers are a lot more cautious,” she said.

(Reporting by Jonnelle Marte; Editing by Dan Burns and Leslie Adler)

Responses

  1. What a bunch of privileged putzes!

    The VAST majority of investments are owned by the top 10% of us.

    The 50-90% most wealthy (you guys) own about 7% of all personally owned investments.

    The OTHER 50% of Americans live hand-to-mouth and own just about ZERO investments BECAUSE THEY CAN’T AFFORD THEM! They spend ALL of their money just trying to survive.

    1. Jealousy looks good on you.

      You DO have a job, right? If you work for a REAL company does it offer 401(k), stock options, or a pension? No? Then why are you working there?

      Maybe instead of waiting for handouts you should try investing some of that money you save by living with your parents.

      1. The facts have nothing to do with me. I am O.K., as you know.

        YOU couldn’t give a f#$k about 50% of the people in this country. ZERO! As proven above.

  2. Stock ownership. It’s not just for the wealthy. Mutual funds, pensions, 401(k)s, IRAs, and other investment vehicles ALL benefit from a rising stock market.

  3. Most of the gains go to the small portion of Americans who are already rich.
    So you’re bashing people who are already rich. Those people, like Sol price, who took a chance on a dream they had and worked hard to make it work and, thus, became rich. Why would you be against this? Most people don’t have the fortitude or ‘balls’ to try and make, invent, or figure out something that America, or the world for that matter, would need. Someone had to make the first paperclip. Someone had to make the first ATM, door handle, pocket knife, etc. Good ideas get rewarded. There are thousands of good and great ideas that made those people money. There is the other side that make something that no one, or very few, want. But when you succeed, you should be rewarded. Sol Price took a chance that his dream would work. And it did. And now he has over 780 stores world wide, they pay a good salary to the 400+ per store employees, they pay health care, they contribute to the economy and pay taxes. Why shouldn’t someone like me, who believes in my work and employer and thus buys stock from them, be rewarded when the stock rises. Like it has this past year from around $230 per share to right around $300. Socialism is the other answer to that question. If rich people aren’t allowed to be rich, then poor people don’t get jobs and there is NO middle class, which is the backbone of America and our way of living. You might want to rethink what you write, or at least investigate it more thoroughly. Being a strong, rich country is a good thing. If you don’t like it here, there are plenty of people willing to take your place, both legally and illegally.

  4. This story is moot as hell if you invested you made gains if not then you have invested nothing to make a gain on. So if you’re too poor to invest why exact should you get a slice of the pie? What kind of skewed nonsense is this about you don’t deserve a part of someone else’s investments.

  5. Well it’s been nice not getting laid off during Trumps time in DC, beats the hell out of obamas time in office. If the stock market is doing well there are jobs, if it isn’t there are lay offs and lack of employment opportunities.

  6. And you must think that those old fogies never spend a dime… they don’t buy cars, they don’t build homes, etc. You know, things that make the economy go, things made where people who are not investing actually work for a living… And you must think that the stock market performs for reasons other than business success. Meaning that those people who without investments don’t have more jobs and opportunities when business is doing well?

    Certainly people with stock benefit directly, but really now, do you think the average plumber with no money in the market would be better off if the market went to 10,000?

  7. “Most of the gains go to the small portion of Americans who are already rich” ,,, WRONG. I’m not rich and have seen my 401k rise by 50% since President Trump was elected. Everyone who has investments has benefited ,, those that don’t ,, didn’t ,,,, simple math !!!

    1. Paul you are right …and everyone living in the country benefitted from the performance that drove up the market… workers had more jobs, better jobs, secure jobs. Construction workers, auto workers, plumbers, etc.

      But as you point out, you don’t have to be rich to invest. Most brokerages have plans that allow you to start with very little money. If our government schools didn’t avoid teaching worthwhile knowledge, perhaps millions of kids would learn that just a few bucks a week invested can grow into more money than their parents ever saw if they keep it up for 40 years…

    2. Same here. We have stocks and have made some incredible gains from our stocks since Trump took office. The gains of course are relative to how much stock we bought. I don’t know where some people get the idea that somehow every one should gain equally. Since Trump took office I haven’t experienced being laid off from work because of a bad economy – it’s been really nice. This of course also is a financial gain for us.

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