The wealthy have been getting richer since the market increased and wages for working people and families have been stagnant. One of the reasons is because computer algorithms are being used to manipulate the market with favor toward wealthy investors.
Americans are still scarred by the financial crisis, and the fruits of this decade’s record-breaking rally fell mostly to the rich.
The financial system had nearly collapsed. The deepest recession in decades was devouring over 700,000 jobs a month. Roughly $13 trillion in stock market wealth, slowly rebuilt since the dot-com bust, had again been incinerated.
It was March 2009. And it was one of the best times in a generation to buy stocks.
A decade later, the bull market that began back then ranks among the great rallies in stock-market history. The 305 percent surge in the S&P 500 is the index’s second-best run ever.
The rise has generated more than $30 trillion in wealth. Adjusted for inflation, that is the most created during any bull run on record, edging out the $25 trillion in gains during the epic streak from December 1987 to March 2000, which ended with the bursting of the dot-com bubble, according to Federal Reserve data.
But compared with Americans’ attitudes during that earlier climb, reactions to the latest rally are downright subdued. There has been no frenzy for stock trading. Nobody is quitting an accounting, advertising, or waitressing job to concentrate on day trading.
Why so somber?
The psychological and financial damage inflicted by the 2008 financial crisis and the ensuing Great Recession continue to weigh heavily. Fewer people are invested in stocks than before that meltdown, and many of them are wary of taking their gains for granted. That caution could last for decades.
“This was probably the most disliked or most suspected rally that we’ve ever had in the stock market,” said Charles Geisst, a professor at Manhattan College who has studied the history of financial markets.
Birth of the Bull
On March 9, 2009, the day the bull market was born, the stock market, like the economy, was in deep, seemingly existential distress. The S&P 500 was down 57 percent from its 2007 peak.
Compounding the pain was the nationwide collapse in home prices, which landed a direct hit on most households’ greatest source of wealth.
The one-two punch destroyed the finances of millions of families. Between 2007 and 2010, the median wealth of a household in the United States dropped 44 percent, knocked below 1969 levels.
“That should have been the signal to everyone that you can go out there and buy stocks with impunity,” said Byron Wien, vice chairman of the private wealth group at Blackstone, the private equity firm.
But to buy stocks, you need money. After watching their fortunes — and retirement funds — shrivel, few Americans were in a position to take a fresh flier on beaten-down stocks.
Those who could were already well-off. In 2007, the wealthiest 10 percent of American families owned 81 percent of the nation’s household stock market wealth, according Ed Wolff, a professor of economics at New York University who studies the distribution of wealth in the United States. By 2016, they owned 84 percent, he said.
The recovery in the stock market made those families even richer, increasing their net worth by double-digit percentages. Median American family wealth, meanwhile, dropped 34 percent.
In the past, such episodes of wealth destruction cast long shadows. For much of the 20th century, the financial habits of the American public were heavily influenced by memories of the Great Depression.
Even in the 1960s, survey data showed that people who were young during the Great Depression were much less likely to invest in stocks, according to research by two economists, Ulrike Malmendier of the University of California, Berkeley, and Stefan Nagel of the University of Chicago.