Bull Case on a Stock Crash Sees End of Fed Gifts to One Percent

One of many things to break in last year’s market rout was a decade-long stretch in which gains in stocks overwhelmed gains in wages.

Whether that modest blow for equality lasts will hinge on how the economy evolves amid the toughest Federal Reserve tightening campaign in 40 years.

It’s a signature irony of an inflation-ravaged world. At a time when rising consumer prices gutted the wallets of American laborers when it came to putting food on the table, rising wages helped their affluence jump when measured against a more abstract set of assets: publicly traded shares. As salaries went up and stocks fell, wage-based buying power versus equities expanded by 25%, by one estimate.

A pointless victory? Perhaps, although consider it next to half a century in which the main channel of personal enrichment in America has shifted mercilessly toward ownership and away from hourly pay. In 1980, a week’s wages at the then-minimum of $3.10 an hour bought shares of the S&P 500 that it would take 3 1/2 months to pay for now, according to an analysis by StoneX Group Inc.

This is a lens through which inflation and the Fed’s response take a different tint, one where a consequence viewed by most investors as unambiguously bad — that it hammered asset prices — is framed as a benefit. After years of loose money put many things out of reach for ordinary Americans, the argument goes, its reversal has started to do the opposite: bring financial assets back into the realm of the affordable.

“These gains were strongest for the workers who suffered the most under the old regime: the young, the least-educated, the poor, and minorities,” wrote Vincent Deluard, StoneX’s director of global macro strategy at the firm. “The process which started in 2022 cannot — and should not — be reversed.”