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The Market

I want to talk about the stock market this afternoon, more importantly, the using of the stock market as an indicator for the health of an economy.

On a near daily basis, Trump has touted the addition of 5.2 trillion dollars to the US stock market as proof that he is making the economy better. It should be noted that Trump is not the first President to tout the market as evidence of his business acumen, they’ve all done it before him and will do it far after he’s gone. While I won’t argue whether Trump’s responsible for the increase or not (he’s not), I do want to make it clear that the stock market going up in value does not mean much for the majority of the population, or the economy as a whole.

In the last 50 years, the share of Americans owning stocks has gone from 75% of the population to 50% (Source: Gallup, March 2017). That alone means half of all Americans do not own a single stock, share, IRA, 401k etc.

Now that we’ve cut those people away, let’s look at those who remain.

The US stock market is currently valued in the range of 30 trillion dollars, 5 of which is the aforementioned ‘Trump Bump’ (which is not a thing).

Of that 30 trillion-

37% is owned by retirement accounts.
25% is owned by individual investors.
25% is owned by Foreign Investors.
(Source: Tax Policy Center, May 2015)

Notable there are two things-

  • A quarter of the US stock market is owned by foreign agents.
  • That 62% (37+25) number is very misleading.

Why is it misleading? Because with that number, you would assume that it translates into households, but alas, averages and medians are very different things.

Of that 62% owned by Americans:

The top 1% own 38%
The Top 90-99% own 44%
And the bottom 90%, accounting for 9 out of every 10 Americans? They own 19% of that 62%.
(Source: Ed Wolff, 2013).

Therefore, 90% of Americans own 12% of the US Stock market.

From this, and digging even deeper, I was able to conclude that to the vast majority of Americans, the measuring of the markets mean somewhere between jack and shite.

(Note: I have omitted American ownership of foreign stocks here, as it was not a necessary factor, and again, applies to the upper echelon.)

As for which indicators actually matter to most us, it’s:

  • Wage Growth
  • Higher percentage of Individual investing
  • Reduction in Personal Debt

Show me those numbers improving, and I’ll show you less income inequality and a far healthier economy.

-Because I Can.

Quote of the Day

“The difference between playing the stock market and the horses is that one of the horses must win.”
-Joey Adams