We can learn a lot from anniversaries. Consider, if you will, the upcoming fifth anniversary of the bottom of the stock market, which hit its low on March 9, 2009. As share prices plummeted, many holders ran screaming for the exit, with predictions of the end of financial and investment life as we had known it filling the air.
Since then, U.S. stocks have almost tripled in value, according to the Wilshire 5000 index, the best measure of the total U.S. market. The value of Americans’ home equity is up sharply, too — but nowhere near as much as stocks have risen. And thereby hangs a little-noticed tale of how people at or near the top of the economic food chain have profited substantially more from the stock and housing rebounds than other people have.
No, this isn’t a screed about the evils, real and imagined, of income and wealth inequality. I’m just telling you what the numbers showed me when I decided to compare the rebound in homeowners’ equity, which is the biggest source of wealth for many Americans, with the rebound of stocks, which is the biggest source of wealth for only a relatively small handful of Americans, primarily those with high net worths. And, I assume, high incomes.
My wealth numbers come from the Federal Reserve’s surveys of households’ net worth. I’ve tweaked some of the Fed’s statistics, which it releases quarterly, to estimate values for stocks on Market Bottom Day in 2009, and for stocks and home equity today.
The Fed excludes mutual funds and retirement accounts from its stock numbers, and I don’t think that including them would change the numbers in any meaningful way, given how concentrated stock ownership is. For example, economist Robert Frank of Cornell University estimates that 5 percent of Americans own 60 percent of all individual stocks.
And here we go.
When last I looked, the Wilshire 5000 was up about 190 percent from the bottom. During the same five-year period, the value of home equity has risen by about 40 percent. That’s about $3 trillion, which isn’t chopped liver. But it’s little more than one-third as much as the $8.8 trillion increase in Americans’ holdings of stocks (as we’re measuring them here).
Five years ago, at the stock market bottom, home equity, at $7.4 trillion, substantially exceeded the value of stocks owned by individuals ($4.4 trillion). Now, stocks are about $13.2 trillion, compared with $10.4 trillion of home equity.
After bottoming on March 9, 2009, stocks roared up — by the end of the month, they had risen about 18 percent — and have pretty much kept going. Meanwhile, home equity kept drifting down until the middle of 2012, when it finally turned upward.
Stocks have set one new high after another, while home equity is still down from its peak of $12.5 trillion in 2005. At the time, stocks were $8 trillion, about 65 percent of home equity. Now, stocks are more than 125 percent of home equity.
The bottom line: The rising tide in stocks and home equity is floating all boats — but the boats with lots of stocks in them are floating higher a lot quicker.
Sloan is Fortune magazine’s senior editor at large.