There’s a Big Difference Between a Rally and a Recovery

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There’s simply no room for the chaos and vagaries of the U.S. stock market in the lives of many Americans. Despite the solicitations of penny stock brokers and get-rich schemers everywhere, investing is generally a game played by those who are wealthy — and most Americans are not.

According to the Federal Reserve’s 2010 survey of consumer finances, only 15.1 percent of American families were directly invested in the stock market, while just over 50 percent were invested through some sort of retirement account. Perhaps unsurprisingly, the distribution of ownership of stocks and retirement accounts was unequal, with higher-income families more often owning equity than lower-income families. According to the survey, just 3.8 percent of families in the lowest 20 percent of the income band owned stocks directly, and only 11.2 percent had a retirement account. At the other end of the spectrum, 47.8 percent of those in the top 10 percent of income were invested directly in the stock market, and 90.1 percent had a retirement account.

This unequal distribution is hardly news, but the data are particularly relevant in the post-crisis period. Over the past five years, since the stock market hit bottom in March 2009, the S&P 500 index has climbed about 176 percent. This has created an enormous amount of paper wealth that is entirely outside the experience of most of the country — and Americans know this.

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