The Wealthiest 10% Own 93% of the Stock Market – What Does This Mean?

Introduction

The astounding figures provided by the Federal Reserve reveal a stark reality – 93% of the total value of the stock market is owned by the wealthiest 10% of society. This statistic challenges the popular notion of a rising tide lifting all boats during the bull market of the past year. Even though a record number of Americans now hold stocks, the majority of the gains have been concentrated in the hands of the top 10%.

The Unequal Distribution of Wealth

The surge in stock values, with the S&P 500 more than doubling in value in a short span of time, has created an illusion of prosperity. However, these gains disproportionately benefit the wealthy due to the basic math of wealth accumulation. Higher-income individuals are more likely to own assets like stocks and retirement accounts, and they will have larger investments. On the other hand, the stock holdings of lower-income individuals remain meager.

The Impact of Policies on Wealth Inequality

Progressive economists argue that the widening wealth gap is a result of policies that prioritize asset growth over wage growth. Tax cuts and avoidance primarily benefit the rich, while minimum wages remain stagnant. The productive gains of American workers have not been reflected in their pay – a trend that began in the late 1970s and coincided with the rise of the shareholder-focused Friedman doctrine. The increasing concentration of wealth in the stock market further exacerbates this inequality.

The Narrowing of the Market

The stock market’s recent rise is not reflective of broad-based participation. A select group of superstar companies is driving the market’s success, making it difficult for many investors to afford their shares. Additionally, the prevalence of private equity acquisitions has reduced the number of publicly traded companies. This means that a smaller pool of stocks is responsible for the majority of the market’s gains.

The Illusion of Market Democratization

While there has been talk of market democratization, the reality is far from it. The concentration of assets in the hands of the top 10% of society contradicts this narrative. The continuous wealth surge to the top is persisting, creating further inequity in the distribution of wealth.

The Larger Implications

This unequal distribution of stock market wealth offers insight into the broader economic boom during the pandemic. Despite an economy that appears strong on the surface, many individuals are left feeling economically disadvantaged. This trend raises questions about the true extent of prosperity and highlights the urgent need for policies that address wealth inequality.

Source: The running of the bulls in the 2023 stock market was more like the waddle of the fat cats