The stock market continues to sucker us, whether we own stocks or not. We’re dupes, patsies, saps, fools, whatever you want to call it, because we continue to equate Wall Street with the health of our economy. A bull market must mean Americans are bathing in prosperity, right?
Riiiiiiiight.
Oh don’t get me wrong, some people are getting rich off the stock market. It’s just not you and me. Because the only thing the stock market really tells us today is how far the vast majority of Americans are falling behind their wealthy fellow citizens.
The stock market may be up but real wage growth has barely budged over the past several years. Our income is not even keeping pace with inflation, which makes it harder to afford housing, never mind buy a single share of Apple stock, now trading at more than $200 per share.
Speaking of Apple, the company is now worth more than $1 trillion, according to Wall Street. If you can somehow believe that any one company is worth 5 percent of the entire U.S. economy, check out the breathless coverage some news media outlets offered:
“A billion dollars isn’t cool. You know what’s cool? A trillion dollars,'” Axios wrote.
“A capitalist triumph that has created wealth for millions,” the Wall Street Journal editorial page proclaimed.
“Apple is worth $1 trillion because of Tim Cook,” MarketWatch said.
But here’s the thing: the stock market has become increasingly out of reach for most of us.
Stock ownership has grown increasingly concentrated among the richest Americans, according to study on household wealth published last November by the National Bureau of Economic Research (NBER). In 2016, people who made $250,000 or more a year (5.2 percent of U.S. households) owned 60.5 percent of all stocks; in 2001, the same income group (2.7 percent of U.S. households) owned 40.6 percent of all stocks.
Or put another way, the top 10 percent of U.S. households by wealth own 84 percent of all stocks in 2016.
Furthermore, these companies no longer split their stocks. As a result, they trade at prices unaffordable to most Americans: Apple ($207.99), Facebook ($177.78), Alphabet ($1,223) and Amazon ($1,823).
Does anyone have a couple of grand lying around? I really want to own one share of Amazon.
But what about mutual funds?
From 2007 to 2013, the percentage of U.S. households owning stock (either directly or indirectly through mutual funds, trust funds, or pension plans) dropped from 49.1 percent to 46 percent, It then rebounded to 49 percent in 2016, though still below its 2007 peak.
In 2016, 54.9 million U.S. households, or 43.6 percent, owned a mutual fund, noticeably down from 2013 when 56.7 million, or 46.3 percent, did, according to research from the Investment Company Institute.
Here’s what bothers me the most. We celebrate Apple hitting $1 trillion yet our own pay checks have been stagnant for several years now.
Real wage growth, which takes into account inflation, has barely budged, despite a tight labor market and strong GDP growth.
Here’s how monthly real wages fared from June 2017 to June 2018, according to the federal Bureau of Labor Statistics:
- June 2017/+0.1%
- July 2017 /+0.2%
- August 2017/-0.2%
- Sept. 2017 /no change
- Oct. 2017/-0.3%
- Nov. 2017/no change
- Dec. 2017/+0.2%
- Jan. 2018/-0.3%
- Feb. 2018/-0.1%
- March 2018/+0.3%
- April 2018/no change
- May 2018/ +0.1%
- June 2018/+0.1%
As you can see, Americans don’t have a lot income lying around to buy Apple stock, even through extra 401(k) deductions.
There are plenty of explanations of why wages haven’t increased: decreased productivity, automation, globalization, the decline of unions. But yet wage stagnation doesn’t attract nearly as much attention as the stock market.
In fact, the rare times that the news media mentions wages is how any increase signals inflation and thus negatively impacts the stock market. We increasingly see ourselves as a nation of investors instead of nation of productive workers, even though most of us really can’t afford to invest.
So pardon me if I don’t break out the bubbly for Apple’s $1 trillion milestone. I’m too busy living in the real world.
Mind Your Business 