Weekly Wisdom | Unstoppable Stock Markets
The Dominance of the Dow and S&P500
By the end of today, the Dow Jones Industrial Average (DJIA) and the Standard and Poor’s 500 (S&P 500) are set to close at all-time highs. The Nasdaq index isn’t far behind. When you consider the mediocre housing market, gas prices at $4.50 a gallon, the Trump tariffs, and the ongoing Iran War, these results are remarkable. And while strong performing stock markets are largely beneficial, there are millions of Americans who feel left behind. The latest polls show 70% of Americans are unhappy with the economy and the rate of inflation. So expanding the stock market pie for more Americans would be good policy.
More thoughts, figures, and data on the unstoppable stock market:
The S&P 500 is an index representing the 500 largest publicly-traded companies by market capitalization in the United States. The 500 companies in the S&P 500 are massive multinational corporations like Apple or Coca-Cola, which operate in nearly every country in the world. The total market capitalization of this stock index is approximately $67.5 trillion, which is more than double the size of the United States GDP.
Within the S&P 500, the Magnificent 7 - Apple, Amazon, Alphabet, Tesla, Nvidia, Microsoft, and Meta - make up a third of the index’s value. Nvidia, the world’s most valuable company, is worth over $5 trillion by itself. The AI boom is largely behind the overperformance of the Magnificent 7 compared with the rest of the index’s companies.
Many of the giant investment firms like Vanguard and Blackrock have S&P 500 ETFs which allow millions of Americans to invest. As a result, roughly half of Americans have at least indirect exposure to the S&P 500 and other stock indexes. The top 1% of Americans own approximately half of all U.S. equities, whereas the bottom 50% of Americans only own 1% of all stocks.
The Trump administration is attempting to rectify this problem by issuing Trump Accounts, which are tax-advantaged investment accounts seeded with a $1,000.00 by the federal government to children born between 2025 and 2029. This gives every child a stake in the success of corporate America and the American economy.
The wealth effect from the booming stock market is fueling the k-shaped economy, whereby the rich get richer and the poor get poorer. Fundamentally, the top 5% of Americans are doing the majority of the consumption happening in the economy. If the stock market crashes, the one bright spot of our economy (elite earner spending) would come to a halt.
Considering the average young Trump supporter is falling behind economically, they don’t really care that stock market indexes are all-time highs. While the 1% are benefitting tremendously, it’s a bad idea for MAGA to pursue policies that inflate the rich while impoverishing the poor. Policies targeting lower inflation, a robust labor market, and increased access to stocks will uplift the struggling middle and working classes.
