The US stock market has stayed high despite punishing economic indicators during the pandemic.
The US stock market has stayed high despite punishing economic indicators during the pandemic (Shutterstock).

Polls show that little more than half of Americans actually own stock. That’s only part of the reason that the stock market a less-than-ideal indicator of how the US economy is doing.

At an ABC News town hall appearance in Pennsylvania this week, President Donald Trump was questioned about the performance of the stock market throughout his administration. During the event, moderated by George Stephanopolous, the president was asked about the stock market’s performance and how average Americans have been financially struggling during the pandemic. 

“I’ve set records on the stock market even during the pandemic,” Trump said. “And that doesn’t happen by accident.” It is true that the stock market has set records during the president’s tenure. It has also managed to remain mostly resilient throughout the pandemic, despite huge crashes early on in the crisis. 

However, the president went on to falsely insist that “stocks are owned by everybody,” and that stock gains would favorably affect everyone—even low-earning Americans. “People that aren’t rich own stock,” Trump added. “And they have 401(k)s—they’re in many cases better than they were before the pandemic came.”

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The facts tell a different story. According to Gallup, just slightly more than half of Americans own stock. But even that figure doesn’t provide the whole picture. According to a February 2020 report from the Economic Policy Institute, median wages in the US sit at $40,000—and that was before the pandemic. Less than a quarter of Americans who make under $40,000 annually own stock, according to Gallup

While it is true that the president’s policies have resulted in the country’s wealthiest residents getting $637 billion richer during the pandemic, every week hundreds of thousands of Americans are still filing new unemployment claims. 

That’s because the stock market and the economy are related, but are not exactly the same thing.  

The stock market is where portions of ownership in public companies are sold. It is connected to things like supply and demand, which underpins the US economy, but can operate independent of real-life factors for a variety of reasons (as is happening in 2020, during the pandemic). The stock market is also often forward-looking—it examines what could or is likely to happen, rather than what is currently happening.

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The better indicators of a nation’s economic health are found elsewhere. In fact, the stock market is often not even mentioned when economists write about the key factors for evaluating the health of an economy. Employment, production growth, and consumer spending are much better indicators of economic health than, say, the S&P 500 Index, which tracks the share prices of the 500 largest companies in the United States.

Those largest companies are often beneficiaries of tax breaks, aid, and other loopholes that average Americans are not given. That can help those companies be more resilient to upheavals in everyday life—like the pandemic, in this case. People who do own stock in those companies—most likely Americans already making more than $100,000 per year, based on statistics—see a windfall, while middle- and lower-class Americans do not.

At this point in time, those more-accurate economic indicators in the United States are not doing well. The most recent numbers show 790,000 new jobless claims filed last week and estimates from the Bureau of Economic Analysis show that gross domestic product, a measurement of all the goods and services produced within the country, was off by over 30% between April and June.

Speaking with CNBC, Robert Jenkins—who heads a global research at independent market research group Refinitiv Lipper—noted that in 2020, the stock market seems about as far removed from reality as possible. “The disconnect from basic human suffering is shocking,” Jenkins said earlier this summer. “It gets more and more insane by the day.”