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Winners and losers in the longest U.S. bull market ever

The trading floor of the New York Stock Exchange on Aug. 21, 2018. (Richard Drew/AP)

The U.S. stock market on Wednesday set a record for the longest-running upswing in its history, fueled largely by the rise of superstar technology companies and an unprecedented era of cheap money from low interest rates.

The current bull market has been running for almost 9½ years, surpassing the dot-com boom in longevity. The market has created $18 trillion in wealth since the Standard & Poor’s 500 bottomed on March 9, 2009, but the gains have been highly uneven, creating winners and losers in the market and broader economy.

A bull market is widely understood to refer to period when stocks climb without a 20 percent or worse decline. While the market has wobbled several times since its nadir in 2009, it hasn’t fallen enough to end the historic run — though analysts see dangers on the horizon.

Before the financial crisis, the most valuable companies on the stock market were ExxonMobil, General Electric, Microsoft and AT&T. Now it’s all technology companies: Apple, Amazon, Google and Microsoft, with Facebook neck and neck with famed investor Warren Buffett’s company, Berkshire Hathaway, for fifth place.

The world’s most powerful technology companies have played an outsized role in driving the record-setting bull market. The technology sector accounts for 26 percent of the U.S. stock market’s value today, the largest sector by far and up from 16 percent before the financial crisis.

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These mammoth technology firms have become central to many people’s daily lives, and the data they collect on users’ social and spending habits has become one of the most valuable commodities on the planet, elevating the big five tech companies above big energy for the first time. But this decade’s tech boom has not been as obviously helpful to the wider economy.

While stocks have shot up, growth has been slow in this recovery and pay gains have been meager, a stark difference from the dot-com era. The 1990s saw computers enter the workforce, helping fuel high levels of worker productivity, wage increases and growth. In contrast, the more recent rise of apps and social media has been accompanied by a flatlining of worker productivity and growth and wage gains far below historic norms.

Growth has picked up this year after the large tax cuts passed in December, but it’s uncertain how long that uptick will last.

Economists can’t fully explain why Main Street has not felt the gains as much as Wall Street. Some say the latest technology advancements haven’t been fully accounted for in the statistics. Others argue the constant checking of phones and Facebook has hurt, not helped, people’s ability to get work done.

The sizable disconnect between Wall Street and Main Street is a conundrum that has had far reaching implications for the U.S. economy and politics.

“The U.S. economic expansion is nine years old and could set a postwar record, but about 1 in 3 Americans tell us that they’re losing sleep over money,” said Mark Hamrick, senior economic analyst at He thinks the rich-poor divide is helping fuel political divisions that can make the country feel as though it’s lurching from one extreme to the next.

The divide “threatens to whipsaw the nation from the right, which has dominated lately, to the left, as defined by likes of Democrat Sens. Bernie Sanders and Elizabeth Warren, and by newcomer Alexandria Ocasio-Cortez,” Hamrick said.

Stephen K. Bannon, a former top aide to the president, recently argued the “legacy of the financial crisis is Donald Trump” because the average American saw the rebound in Silicon Valley and on Wall Street but not in their own pocketbook.

Americans are also not creating as many new businesses as they once did. New business formation is at a 30-year low, according to the U.S. Census Bureau. There are concerns that superstar technology firms are sucking up talent from other parts of the economy and making it harder for new firms to enter.

When it comes to pay, there’s evidence suggesting that huge firms help keep wages down by not poaching workers from one another and even colluding to put a ceiling on compensation for some positions.

Billionaire Ken Langone, a co-founder of Home Depot, the home-improvement retail giant, said some companies need to step up more for their employees.

“There are any number of companies that could be a lot more generous with their people,” said Langone. “We need enlightened management that pays people what they need to live on. I never want somebody working for me who is worried about paying the milkman.”

Just over half of Americans — 52 percent — have at least some money invested in the stock market, according to the Federal Reserve, meaning they have gained directly from the market’s run up. Among those with money in the market, half have less than $40,000 invested.

It’s an ongoing challenge to find ways to get more Americans putting away enough money for retirement and investing sufficiently in stocks to build wealth. Only 8 percent of workers have traditional pensions today, down from 22 percent in 1989, according to the Boston College Center for Retirement Research.

“Anybody who holds a pension is helped by stock market gains because it means the pension is better able to cover its obligations, is less likely to fail and less likely to go to taxpayers for additional money,” said Ivan Feinseth, chief investment officer at Tigress Financial Partners. Even people who hold life insurance policies stand a better chance of collecting and of paying lower premiums if the insurer makes money on its stock investments, he said.

The bull market was also fueled by cheap money as the Federal Reserve cut interest rates to their lowest level in history, near zero. The move had the effect of pushing investors out of bonds and into riskier stocks and made corporate borrowing easy.

“This is an unusual bull market because monetary policy really drove much of the movement upward,” said Kristina Hooper, chief global market strategist at Invesco. “The Fed’s actions made it a lot less risky to own equities. The fundamentals didn’t matter because you had a giant put under stocks.”

This bull market can be thought of in two phases: The Fed’s policies kicked it off in the early years with low rates and a massive bond-buying program known as “quantitative easing.” More recently, starting around 2014, corporate profits and economic growth began to show more strength, helping to propel stocks higher, especially as U.S. consumers really began to open their wallets again and spend.

For now, the economy and corporate profits are showing signs of strength. The superstar tech firms are sitting on large amounts of cash, which will help them withstand any head winds far better than the dot-com darlings did in 2000 when they were largely surviving on hopes and prayers.

Many experts say the biggest risk is that inflation picks up quickly after years of dormancy, forcing the Fed to abandon its “slow and steady” pace of interest rate hikes and raise rapidly. Quick rate hikes can cause firms and families to pull back on borrowing and spending, leading to a slowdown or recession.

Other risks to the market, analysts say, include trade wars and growth slowing overseas.

“It’s usually something we don’t anticipate that ends a bull market,” said Kate Warne, an investment strategist at Edward Jones. “Which is why investors should be asking themselves if they are prepared with the right mix of stocks and bonds for whatever is ahead.”