The Washington PostDemocracy Dies in Darkness

Yes, stocks are up. But 80 percent of the value is held by the richest 10 percent.

(Michael Nagle/Bloomberg)

In a recent piece for this page, I focused on how well the stock market’s been doing since President Trump was elected. Although explaining market movements is a bit of a fool’s game, especially as bull can turn to bear awfully quickly, I asserted that there’s something rational going on. Market participants are bullish on Trump because they believe that, despite some rhetoric about helping the middle class, he’ll cut taxes for the wealthy and for corporations, cut back on market oversight, and spend more on defense.

I suspect the political barriers to achieving this agenda are higher than either Trump or market participants are pricing in, but even so, the whiff of investor-friendly policies is surely behind the rally.

There is, however, an important question I neglected to cover in that last piece: Who benefits from the increase in stock market wealth? Thanks to the work of economist Ed Wolff, who has been compiling such data over many years, we can answer that question.

First, there’s a bit of a myth that through indirect holdings, like holdings of stock in a pension fund, the stock market has become democratized, and everyone’s all in. Not so. Wolff’s data shows that while stock ownership has increased over the past few decades, in 2013 (his most recent data point), less than half — 46 percent — of households owned stocks, either directly or through their holdings in some sort of fund (e.g., a retirement account). Contrast that with the 94 percent ownership rate of the top 1 percent.

But even that 46 percent ownership rate gets misunderstood, because it doesn’t differentiate how much stock is owned by different income classes. Less than a third of all households hold at least $10,000 in stocks, compared to 93 percent of those households in the top 1 percent.

The figures below show that, since the late 1980s, about 80 percent of the value of the market has been held by the top 10 percent. Within that top 10 percent, the share of stock wealth held by the top 1 percent is about equal to the share held by the 90-99th percentiles; both groups’ shares are twice as large as the share that the entire bottom 90 percent holds.

The deeper problem here is the fact that wealth concentration is even more skewed toward the rich than income concentration. The median net worth (income + assets including homeownership – debt) of white households was about $117,000 in 2013. For African American households, the comparable figure is just under $2,000. In other words, black net worth is less than 2 percent that of white net worth.

When Billie Holiday sang, “them that’s got shall get, them that’s not shall lose,” this may well have been what she was thinking about. If you start out with wealth, you don’t have to be a financial genius to tap the miracle of compounding and end up with real money. If your income is your paycheck … well — “God bless the child.”

Policy can make a difference in this space, but for all policymakers’ talk about helping out the middle class, all I’m hearing about is repealing Obamacare — a highly progressive program supported in part by taxes on high incomes that provide subsidies for those of more moderate means — cutting Medicaid, and paying for regressive tax cuts by cutting spending on programs that support those with lesser incomes, like housing support, Head Start, college assistance and much more.

Look, it’s great that the market is hitting new highs. That’s much better than the alternative. But let’s keep it real in terms of who benefits.