Who Benefits from the Climbing US Stock Market?

March 11th, 2013 at 11:58 am

I was listening to the radio this weekend and heard some equity market cheerleaders going on about how the melt-up in the stock market lifts almost everybody’s fortunes.  While I agree that it’s important not just for the top 1%—a lot of pension funds and 401(k)’s get a boost from the bull—the vast majority of the value of the stock market is held by the wealthiest households.   I’m sure that’s a big “duh” for a lot of readers but the idea that the market lifts all boats is probably more pervasive than you think.

The figure below comes from wealth scholar Ed Wolff through EPI’s State of Working America (you should really just read their wealth chapter—one stop shopping for this info).  It shows who owns stock market wealth over time.  The little smudge at the bottom is the bottom 40% of households, and the middle fifth doesn’t do much better.  The top 1% holds over a third of equity market wealth and the top 10% holds about 80%.

What does that mean in dollar terms?  In 2010, according to Wolff’s analysis, the stock holdings of the middle fifth were worth about $9,000.  The holdings of the top 10% were worth $500,000, and those of the top 1%: $3.5 million.

So how come I had to listen to commentators going on about how 50% of households own stocks now, up from 30% in the late 1980s?  Because they’re not talking about stock wealth; they’re just talking about shares, with all of that increase coming from retirement accounts.  If you own one share or a thousand shares, you’re counted the same in that calculation.

OK…and like I said, it’s true that a lot more people are in the market now.  But unless you want to mislead, you’ve got to be careful to also make the points from the graph below, because your increase in wealth is of course proportional to your holdings.

So, go ahead and cheer the climbing market, but don’t kid yourself that it’s raining down wealth on everybody.

stock_wlf

Source: EPI, State of Working America, link above

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9 comments in reply to "Who Benefits from the Climbing US Stock Market?"

  1. foosion says:

    “But unless you want to mislead” What makes you think they don’t want to mislead?

    If they don’t mislead, it will be much harder to cater to the desires of the top 1% (really the top 0.001%). If they don’t mislead, how could they get away with cutting government (including Social Security and Medicare and education and infrastructure and child nutrition and …) in order to cut the taxes of the best off? If they don’t mislead, how could they get away with massive pre-tax redistribution through intellectual property laws (patent and copyright raise prices for everyone, with benefits flowing to the few), too big to fail policies which benefit the banking class (the industries entire profits approximate the value of implicit government guarantees), policies which increase competition for low paid workers while insulating the higher paid (doctors, lawyers, etc.) through immigration, licensing, exchange rate policies, etc., etc.

    Misleading is essential for our political system as we know it. Where’s the incentive to change?


  2. Tom in MN says:

    How about asking the question: How many people have more in stocks than in their house? Unless you own more in stocks than your house, your net worth is probably still down due to lower house prices. As you say, this counting any amount of shares are being in the market is pretty meaningless.


  3. Sue says:

    Here’s a great blues response to the Dow hitting a new all-time high:
    http://www.youtube.com/watch?v=Edzxnp-aFmw


  4. Auros says:

    A moderate-Republican friend of mine asked about this chart whether it accounts for the ownership by lower-99% households of a stake in things like state and private pension funds (CalPERS, the . My guess is that it probably does — EPI is pretty good at this stuff — but I’m having trouble finding validation of that in the stuff about methodology on their site.

    Do you know the answer?

    BTW, a funny comment from my spouse, this morning, when we were discussing the current Republican approach to government: “They keep throwing sand in the gears, and then saying that the machine doesn’t work, and hoping we’ll give up on trying to make it run.”


  5. Persistence of Poverty says:

    I think you understate the case–yes, the only reason most people are invested in the stock market is because of 401(k)’s, but the only reason people have 401(k)’s is because of the fall of defined benefit pensions. Thus, the very fact that 401(k)’s exist is because of increasing inequality.

    http://persistenceofpoverty.blogspot.com/2013/03/recovery-going-according-to-plan.html


  6. dailygainsletter says:

    Hi

    In my opinion Invest: Now in order to make some serious improvements on your capital growth you need to start investing. Investing is different from spending as the money went in spending never comes back while the money used in investing gives you returns. In simple terms if you have monetary or physical assets lying idly, you can invest them and earn more capital from them. Investments help in the growth of your assets while keeping your principal assets intact. There are different types of investment you can choose from for instance you can convert your monetary assets by buying physical property such as land and gold and earn returns from it through various means. You can also invest you capital in buying stocks and bonds and considering the present economic scenario you can earn decent returns from such investments.

    Thanks.


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