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The #1 Reason Investors Are Supporting Trump | The Mesh Report

The #1 Reason Investors Are Supporting Trump

the Mesh Report Staff October 6, 2020 Comments Off on The #1 Reason Investors Are Supporting Trump

President Donald Trump regularly promotes the soaring stock market as a barometer of the economy’s health, tweeting again on Monday that it’s a key reason he should be reelected. But investors aren’t sharing the wealth.

The reality is that the wealthiest 1 percent of Americans own 50 percent of the value of stocks held by individual households, and the top 10 percent control 88 percent. The huge inequity in who holds shares may offer the strongest rebuttal that the market’s performance does not translate to middle class economic success. What’s more, the stark divide is fueling an increasingly lopsided economic recovery.

new survey by the Federal Reserve shows that more than half of American families — 53 percent — were invested in the stock market as of the second quarter of this year, either through direct ownership or retirement plans. But the value of shares is skewed so sharply toward high net-worth individuals that they’re the ones reaping most of the benefits of the market’s more than 30 percent surge in the last six months.

That’s sparking fears that the U.S. is headed for a so-called K-shaped recovery — where a graph of economic growth would show richer Americans’ fortunes brightening while poorer people’s wealth craters. Labor Department reports last week underscored the trend, showing that job growth from the coronavirus pandemic is slowing even as millions remain unemployed.

“Wealth opens up opportunities, wealth gives security,” said Claudia Sahm, a former Fed economist who specializes in income inequality issues. “If the recovery is very slow for a number of households, you’re denying them those opportunities,” she said, adding that it will “grind on them for decades.”

The growing wealth disparity may explain Trump’s struggle to win working class voters in crucial battleground states such as Pennsylvania and Michigan who helped push him over the top in the 2016 presidential race.

But it also has deep implications for government policy. The Fed itself has taken aggressive emergency action during the coronavirus crisis — backstopping sputtering debt markets and pumping trillions into the economy. But those policies are squarely aimed at making it easier for companies to borrow money to keep doing business, so they boost stock prices far more than ordinary incomes. As a result, the central bank itself has drawn criticism for inadvertently stoking wealth inequality.

Continue Reading at Politico



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