Wall Street record high belies widening gap between investor haves and have-nots
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It has been the best of times for the S&P 500, as the stock index hit its highest level again Monday. But for many Americans who find themselves laid off, furloughed or just squeaking by, this pandemic recession is the worst of times.
This raises the question: Who actually benefits when Wall Street sets a record?
Three decades ago, the wealthiest 10% of Americans owned 79% of the stocks and mutual funds in the market. Now, they own 87%, according to the Federal Reserve Bank of St. Louis.
Economist Edward Wolff, who studies income and wealth distribution at New York University, said many middle-class families have been left out of market gains because their money tends to be locked up in their homes.
“Since middle-class incomes have been pretty stagnant the last 20 years or so, once people pay for their home, they don’t really have much money left to buy other assets,” Wolff said.
Despite efforts to broaden stock ownership for the middle class, including 401(k) savings accounts offered by employers, “the amounts of money invested are still pretty small,” Wolff said.
The statistical divide in stock holdings has widened since the Great Recession. During market drops, the wealthy have stayed in while many others sold. Middle-class investors have bailed out as volatility made it hard for many to sleep at night, said Yosef Bonaparte, associate professor of finance at the University of Colorado Denver.
His example: himself.
“In March, when the market was falling apart, I had to go on a different bed and sleep,” Bonaparte said. “At 2 a.m. I woke up sweating and cold. Stock market volatility, it’s not easy.”
At times, bull markets can help all Americans, assuming companies generate healthy earnings, create jobs and share wealth with employees, said Joseph Minarik, economist at the Committee for Economic Development of the Conference Board.
But in this pandemic, Minarik said, many lower-income earners — say, in retail — haven’t been able to work due to pandemic restrictions. By contrast, many higher-salary workers can do their jobs from home and keep investing.
“At this moment, there is a substantial dissonance and a painful dissonance between what’s going on in the stock market and what’s going on on Main Street,” Minarik said.
COVID-19 Economy FAQs
What’s going on with extra COVID-19 unemployment benefits?
It’s been weeks since President Donald Trump signed an executive memorandum that was supposed to get the federal government back into the business of topping up unemployment benefits, to $400 a week. Few states, however, are currently paying even part of the benefit that the president promised. And, it looks like, in most states, the maximum additional benefit unemployment recipients will be able to get is $300.
What’s the latest on evictions?
For millions of Americans, things are looking grim. Unemployment is high, and pandemic eviction moratoriums have expired in states across the country. And as many people already know, eviction is something that can haunt a person’s life for years. For instance, getting evicted can make it hard to rent again. And that can lead to spiraling poverty.
Which retailers are requiring that people wear masks when shopping? And how are they enforcing those rules?
Walmart, Target, Lowe’s, CVS, Home Depot, Costco — they all have policies that say shoppers are required to wear a mask. When an employee confronts a customer who refuses, the interaction can spin out of control, so many of these retailers are telling their workers to not enforce these mandates. But, just having them will actually get more people to wear masks.
You can find answers to more questions on unemployment benefits and COVID-19 here.
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