It’s a pretty obvious statement of fact: The wealthy own more than the less-wealthy.
While that kind of overgeneralization certainly isn’t going to knock anyone’s socks off, the specifics of the well-to-do getting a bigger and bigger piece of the pie as we move further into the 21st century are indeed concerning.
It’s something I’ve written about a number of times myself.
Which makes a new report that the wealthiest 10 percent of Americans are currently holding a record 89 percent of household-owned stocks, at the very least, relevantly interesting.
According to recently released Federal Reserve data, the bottom 90 percent of Americans were the proud owners of only about 11 percent of individually held stocks as of the second quarter of 2021. That was down from 12 percent pre-pandemic.
But the smaller percentage of the stock market owned by the bottom 90 percent was not due to the less-wealthy making poor investments during the pandemic.
In fact, in total dollar value, the bottom 90 percent made significant gains: They added $1.2 trillion to the value of their corporate equities and mutual fund portfolios.
The wealthy simply gained at a higher rate than the masses — no surprise, perhaps, considering that the top 10 percent own far more stocks than the bottom 90 percent and given that the stock market is up overall by nearly 40 percent since January of 2020.
The wealthy were generally able to beat even that impressive market, with the top 10 percent seeing a 43 percent gain in the value of their stocks from January of 2020 to June of 2021, according to the Fed.
Meanwhile, the bottom 90 percent realized a 33 percent increase in the value of their stocks over the same time period — nothing to sneeze at, but a full 10 percentage points behind their wealthy counterparts.
The most elite did especially well. The top 1 percent added more than $6.5 trillion to their wealth from their gains in corporate equities and mutual funds over the course of the pandemic.
Income and wealth inequality are absolutely serious issues. The broader question, however, is whether the especially rich owning a greater proportion of the stock market than ever before has particularly troubling implications in the inequality conversation.
On the one hand, is it really so surprising that the wealthy own a much higher percentage of individually owned stocks than the less-wealthy? It has long been the case that higher earners and those with a higher net worth disproportionately participate in the stock market.
Perhaps stocks are just another luxury good, in the same way that you’d expect the economic elite to own a far higher percentage of mansions and sports cars compared to the bottom 90 percent.
On the other hand, though, stocks are a little unique in that they have traditionally been one of the most reliably appreciating assets. The more stocks a very wealthy person owns, and the fewer everyone else owns comparatively, the more the wealth gap is going to continue to widen over time.
If recent financial history has demonstrated anything, it is that the more well-to-do love plowing their money into stocks, whereas those lower on the wealth ladder tend to put their excess capital into other assets — notably, their homes.
There is still a great deal of wealth inequality evident in the housing market. Yet, the inequality there is not quite as pronounced as it is in the stock market.
One recent study, for instance, found that the top 10 percent in owner-occupied housing units owned about 46 percent of net housing wealth, leaving 54 percent of net housing wealth in the hands of the bottom 90 percent. Although that is still obviously quite disproportionate, the bottom 90 percent has nearly five times more of a share of the owner-occupied housing market than it has of the stock market.
As a homeowner myself I certainly don’t see anything wrong with storing a little wealth in one’s house.
Even so, I kind of like the (possibly apocryphal) wisdom of the ancient Mongolians that a man shouldn’t own more than he can carry at speed on horseback, and it’s sure easier to access your weightless intangible stock wealth through a smartphone than it is to try to carry around lodging.
Jonathan Wolf is a civil litigator and author of Your Debt-Free JD (affiliate link). He has taught legal writing, written for a wide variety of publications, and made it both his business and his pleasure to be financially and scientifically literate. Any views he expresses are probably pure gold, but are nonetheless solely his own and should not be attributed to any organization with which he is affiliated. He wouldn’t want to share the credit anyway. He can be reached at [email protected].