E TalkMarkets Tuesday Talk: Of Brexit And Brandade

The markets continue their volatile trend upwards on optimism that there will be a Brexit deal in Europe and a stimulus package in the U.S. by year's end. Brexit hinges (or unhinges) on U.K. fishing rights, level playing fields and governance, while additional stimulus in the U.S. comes down to just plain (and complicated) old politics. Monday the S&P 500 closed at 3,647, down 16 points, the Dow closed at 29,862 down 185 points, while the Nasdaq Composite closed at 12,440, up 62 points. Currently, Nasdaq 100 futures are trading at 12,529, up 73 points, Dow futures are at 30,042, up 177 points and S&P futures are trading at 3,672, up 25 points. In Europe the markets are trading mixed, with the DAX solidly up.

As stock market levels rise from March 2020 lows and above previous heights, indicating greater wealth creation, Timothy Taylor in his article Some Thoughts On US Wealth Patterns, takes a look at where this wealth is going and how this has changed over the last 70 years. Taylor notes that the ratio of wealth to GDP was fairly constant at around 3.6 from 1950 to 1990 and then started climbing with the rise in the stock market starting in the 1990s, after volatility stemming from the Financial Crisis of 2008, the wealth to GDP ratio is now above 5, a near all time high. What some readers may already know, this rise is benefiting the most wealthy in society at the expense of other segments of the population. Taylor notes:

"Even as the wealth-to-GDP ratio has been rising, not all groups of the wealth distribution have benefited in the same way. Lest I be accused of burying the lede here, the big story with US wealth is the growth in wealth/GDP ratio and the growing share of that wealth held by the top 1%. The share of wealth going to the top 1% shows occasional setbacks, like when the stock market fell in 2001 or in the aftermath of the Great Recession, but overall, the share of wealth going to this group has risen from about 24% of the total back in 1990 to above 30% of the total more recently. One thinks here of some of fortunes that have been made by Microsoft (MSFT), Google (GOOGL), Facebook (FB), Apple (AAPL), along with Berkshire Hathaway (BRK-A)--all benefiting from the overall run-up in the stock market prices of these companies...

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William K. 1 month ago Member's comment

Very interesting and also quite educational. And the rich get richer because those setting the rules want to "take care of their friends." Certainly those in government know how to help themselves. AND by the way, that is NOT doing meany favors. The fact, verified by history, is that people will put up with a great deal of misery, if it is heaped on slowly. Then all at once, just a small bit more, and the revolution ignites, or even explodes. Where that level of misery that leads to revolution can only be guessed at, and what will trigger the explosion may be a very small spark that did nothing a hundred times before. Thus the government and the 1% really need to remove some of the misery occasionally.