The Stock market has surged, in August, almost to its historic February high, prior to the onset of the Covid-19 pandemic. This in spite of the absence of a new stimulus, the bi-partisan strife in the capital, and the spike in the Covid-19 cases this summer. In fact, the market has gained 32% since Trump took the office of the presidency. Good news? Yes, if you are among the top 1% but if you aren’t, the figure is largely irrelevant. The top ten percent of households account for 84% of all the equity from stocks while the top 1% enjoys one half of all equity. The next 10% account for 9.3% of the stock values and the bottom 80% weigh in at 6.7%. Although 52% – 54% of American households own stock, some by way of investments in 401Ks, they average $40,000 in total value. The value of the market has increased ten times since 1990 during which time the share by the top 1% of households experienced dramatic increases in their portion of the US wealth. The health of the stock market does not accrue equivalently across the sectors of the population. This measure of prosperity pertains to a micro sector of the society.
The market has sustained its performance in August, even after the failure of the government to pass a second set of stimulus programs. Unemployment is high, though the rebound is a bit better than anticipated, and the GDP was down in the second quarter. It is hypothesized that the resilience in the market is based on the assumption that there will be a stimulus passed by the end of September to avoid a government shutdown. The Federal Reserve’s pledge to keep the prime rate low until inflationary rates are attained, at least until 2022, and the faith in an eventual stimulus have kept the market hearty though its health is tenuous.
Evidence from the first stimulus package indicates that many Americans who could afford to do so saved their government payouts. Those who did not need to use their checks saved them and overall consumer spending declined indicating a preference for banking the acquired asset for future needs. Since February, personal savings rose from 8.3% to 33.5% of disposable income. Bank of America reported clients’ checking and savings accounts rose by 13% and 8% respectively. Average Americans had between one thousand and three thousand dollars more in the bank than prior to the pandemic. Credit card debt was down. Commercial bank deposits rose by 15% between February and August. Currently, the rate of savings is slowing and there is evidence that household spending has been falling as the stimulus wound down, especially among low income households. Credit card debt is creeping up again. The claim that the robust market is evidence of a good economy pales with respect to the persistent unemployment, failed businesses, and the health costs associated with the virus. After an upsurge of economic indicators in the late spring and early summer, the growth of the economy is slowing.
The evidence of the economic gains of the Trump era speaks mostly to the enhancement of the wealth of the elite. The increase in savings and decreased spending, associated with the stimulus, show what Americans can do if they have some flexibility with disposable income. Because the stimulus was not very accurate in targeting the most vulnerable it demonstrates what people will do if they have discretionary income. For communities with concentrated poverty it can be seen that targeting them for business investment and employment programs is one way to improve the standard of living. Another stimulus would help vulnerable families and businesses and bolster the chances of avoiding the worst fallout from the continued virus threat.