Wait for the beat drop... The stock market has been giving off manatee meme energy. While stocks dipped last week, they've been cruising around records thanks to vaccines, $6T in stimulus, and the Fed's economy-boosting rate policies. Low interest rates make borrowing cheaper (think: mortgages, biz loans) — plus, they make stocks more attractive compared to less risky investments. All these factors helped the S&P 500 soar a whopping 35% over the past year. But how is that translating to American wallets?
- Americans are getting richer. Last year, US household wealth surged to records as Americans accumulated a fresh $12T. In the first quarter of this year, wealth across all US households jumped ~4%.
- But the gains aren't even... A third of the total increase in Americans' net worth last year went to the top 1%, just 3M people — the same as went to the bottom 60%, or 199M people.
- The second half of 2020 also brought the sharpest rise in the US poverty rate since the '60s. It's expected to hit 14% by end-of-year, with poverty rates for Black and Hispanic Americans double those of white Americans.
Now drop the stats... Income inequality is nearly the highest in at least half a century. The top 1% of Americans have 16X the wealth of the bottom half, compared to 6X in 1990. Here's why:
- Key stat: About half of the total increase in Americans' wealth last year came from rising stock prices (though soaring home values also played a role).
- Break it down: The wealthiest 10% of Americans own 90% of stocks and mutual funds held in the US. The bottom half of households hold less than 1%.
Some benefit way more than others… from a booming market. While most Americans got wealthier, the rich got way richer — that's because the top 20% of earners own nearly all the stocks held by US households. That could change as retail participation in the market continues expanding: last year, more than half of US households invested in stocks, up from one quarter in the '80s. Still: factors like wage gaps, technological changes, and globalization remain at the center of US wealth inequality.