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Main Street and Wall Street Hardly Intersect

March 26, 2018

Do near-term dips in the stock market bother you?

 

Of course. Nobody likes seeing their account balances drop.

 

But it’s all right. We’re all in this together, right?

 

Actually, no, we’re not.

 

In fact, half of all U.S. households have no stock holdings whatsoever. And the latest data (from 2016) say most households had less than $5,000 in stocks.

 

The people with the most money in the market come from the top 10 percent of earners. And many of them are not American, as international investors own 35 percent of all U.S. corporate stocks.

 

So recent dips probably aren’t a big deal for most people because they aren’t invested in stocks. Similarly, and unfortunately, big gains then aren’t either.

 

And that matters for the economy as a whole. Businesses need customers, after all.

 

If wages aren’t growing for most (see below), where will money come from for future purchases?

 

 

Savings rates aren’t high. So if people want more money, they’ll turn to debt. So yes, there could be growth in debt.

 

Do all these conditions invoke feelings of consumer confidence and a spending spree? No!

 

The market has outpaced wages in terms of growth. That could correct soon, which won’t be fun for investors. But for those in it long-term, however few that may be, it could an opportunity for value.

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