Markets Boomed. What about the Middle Class?

Written by Aldo Gonzalez

However, only 52 percent of American adults have a stake in the stock market. This is the lowest market participation the United States has seen since Gallup began collecting data on this matter.

Markets reached new heights in 2017, but how much of that market progress benefited the middle class? If you listen to President Trump, the stock market is an accurate barometer of the general economy. But income measures from capital gains tell a clearer story.

According to Deutsche Bank Securities, the top one percent earns 22 percent of total income in the United States with most of that coming from capital gains; the top 10 percent owns nearly 90 percent of stocks, directly or indirectly, as shown by 2016 data from Deutsche Bank as well. Furthermore, NYU Professor Edward Wolff shows that the top one percent in terms of wealth own 38 percent of stocks.

However, only 52 percent of American adults have a stake in the stock market. This is the lowest market participation the United States has seen since Gallup began collecting data on this matter. This measure takes into account individuals who indirectly own stocks via employee-sponsored retirement plans. However, access to these investment vehicles is limited to those with higher income. To contrast, Pew Research found that only about 19 percent of American adults can claim direct ownership of stocks.

With this picture in mind, the stock market seems to be a supermarket for the well-off, rather than a barometer of wider economic health. American economist and Washington Bureau Chief for MarketWatch, Rex Nutting asserts exactly this: “The stock market is actually a process for extracting wealth from corporations and passing it along to the wealthy people who own shares… but for those trying to build wealth, it’s not such great news.”

When it comes to gauging economic health and designing policies that increase growth, favoring policies that improve access to different asset classes, increase financial literacy, and encourage youth investment in the markets are steps for creating a more regenerative and inclusive stock market that reflects the wider economy.