With the U.S. stock market repeatedly hit new highs and house prices rising at the highest level in recent years, in the context of the epidemic getting out of control and the economic recession, the United States unexpectedly staged an asset feast, which shocked many people.
However, many analysts point out that the main benefit of this wealth carnival, fueled by factors such as the loose monetary policy of the Federal Reserve, is mainly beneficial to the owner of the asset, that is, the rich class.
For the low-paid class and minorities struggling with the unemployment crisis, this feast obviously has nothing to do with them.
More importantly, as the rise in asset prices further widens the gap between rich and poor, the rift between all sectors and different ethnic groups in the United States is deepening, which lays hidden dangers for a new round of social contradictions in the future.
The Dow Jones Industrial Average hits a new high.
On February 17th local time, the Nasdaq index of the U.S. stock market closed lower, the S&P 500 index remained unchanged, and the Dow Jones Industrial Index closed higher.
Due to the temporary fall out of favor of technology stocks and the rise of inflation expectations, the U.S. stock market seems to feel some pressure.
However, thanks to the loose policy of the Federal Reserve and the general expectations of the market for future large-scale rescue plans, market sentiment remains positive.
However, the loose stance of the Federal Reserve, coupled with President Biden’s $1.9 trillion rescue plan, has led some analysts to warn that inflation is about to rise.
Some investors worry that the Federal Reserve may change its policies earlier than expected, thus putting pressure on the market, while others warn of asset price bubbles.
Dr. Xia Chun, chief economist of Noah Holdings Group, said in an interview with CCTV that although the stock market bubble exists objectively, such as the cash share of fund managers has reached a new low for many years, and the proportion of positions of some customers has reached a new high for many years, due to the current economic performance, coupled with the easing policy can be It can be difficult to exit, so it is not time for the bubble to break.
Real estate has not cooled down.
In addition to the stock market boom, the prosperity of the U.S. real estate market under the epidemic has also attracted more and more attention recently.
Although housing prices in several major cities such as New York and Los Angeles were hit by the epidemic in 2020, overall, housing prices in the United States have risen the most in recent years.
The annual rate of the S&P/CS20 U.S. metropolitan home price index released at the end of January is 9.1%, the highest since mid-2014.
The median U.S. home price in December 2020 has climbed to a record high of $266,000, up 8.4% year-on-year, according to Zillow, a U.S. real estate consultancy. Zillow expects median house prices to continue to rise by 10% this year, while Realtor, a U.S. real estate portal, predicts a house price increase of about 5.7% in 2021.
Regarding the boom in the U.S. real estate market under the epidemic, Wang Xiaobo, founder of the Carmela family think tank, told CCTV reporters that the Federal Reserve lowered the target interest rate to near zero last year, resulting in a decline in mortgage interest rates and a surge in home purchase and refinancing activities.
Meanwhile, as many people switch to working from home and studying amid the pandemic, the demand for larger living space has surged, which has also boosted the real estate market.
Dr. Xia Chun, chief economist of Noah Holdings Group, analyzed that today’s Americans in the 30-39 age group witnessed the bursting of the real estate bubble more than ten years ago, making their proportion of real estate allocated to real estate for the past few years has been low.
But now more than a decade has passed, and these people have entered the golden age of marriage and childbirth, and the demand for housing has begun to increase.
In addition, many northern Americans are constantly migrating south, represented by the retired baby boomer generation, who want to settle in the warm South, which constitutes another demand in the U.S. real estate market.
The asset feast has nothing to do with most people.
Unfortunately, although the U.S. stock market and housing prices have risen together with the housing market, which are fueled by factors such as the loose monetary policy of the Federal Reserve, for the bottom people who are congenitally short of assets, the asset feast is obviously irrelevant to them, but further exacerbates the gap between rich and poor and lays hidden dangers for social contradictions.
The total wealth owned by the American billionaires has increased by $1.1 trillion since mid-March 2020, largely due to strong stock markets, according to a report released by the American Policy Institute and the American Tax Equity Association in January.
The report shows that since March 18, 2020, 46 people have joined the ranks of billionaires, and the 660 billionaires in the United States have a total of $4.1 trillion in wealth, two-thirds more than the wealth of Americans at the bottom 50% of the income pyramid.
Meanwhile, according to data released by the University of Chicago, Notre Dame and other institutions, more than 8 million Americans fell into poverty in the second half of 2020, some of which have been hit harder than others.
At present, the poverty rate of African-Americans is 5.4 percentage points higher than in June 2020, about 2.4 million people are trapped in poverty, and for those with only a high school or lower education, the poverty rate soared to 22.5% from 17% in June last year.
The analysis believes that the coronavirus epidemic has exacerbated economic inequality.
After the U.S. Treasury Department and the Federal Reserve provided stimulus measures to the economy and the market, many people above the middle class were able to work from home, and the price of financial assets rose, their retirement accounts have been rising.
At the same time, the job opportunities of low-wage workers have been greatly reduced, they also have few financial assets, their financial situation is deteriorating, and some workers who were hovering near the poverty line have completely reduced to poverty.
According to the Federal Reserve, the richest 1% of the people in the United States hold 50% of the stock market assets, while the richest 9% of the people in the United States hold 38% of the assets in the stock market, which shows that the stock market is performing strongly, mainly benefiting the rich and does not help the ordinary people very much.
Therefore, it is understandable that according to the National Economic Survey released by CNBC, as many as 57% of Americans believe that the three major U.S. stock indexes have hit record highs, which means that enterprises and the rich perform better, while only 30% of the respondents say that the performance of the stock market means that the overall economic performance is satisfactory.
Data from the Federal Reserve also show that African-American and Hispanic families in the United States own only half of that of white families, and this divergence in asset ownership further exacerbates the gap between rich and poor among races.
In addition, the U.S. real estate market is booming during the epidemic, which obviously mainly benefits the house owners, or the income situation can support the white-collar class who can use low interest rates to buy houses.
For those who lost their jobs during the epidemic, house prices have risen to record highs, which is not good news. Similar to equity assets, African-American and Hispanic families also have significantly lower housing ownership than white families, indicating that the housing boom will also amplify the gap between rich and poor among races.
Dr. Xia Chun, chief economist of Noah Holdings Group, pointed out that the gap between rich and poor in the United States and the stock market bubble are complementary and mutually causal. In fact, the rich don’t consume much and have a high proportion of investment.
In addition, they have a lot of money.
The existence of the banking system causes a surplus of savings, which results in insufficient aggregate demand, low growth and low interest rates, which in turn stimulates the development of the stock market, constantly widens the gap between rich and poor, and quantitative easing.
It can take much longer than one might think, in which case funds pour further into the stock market and real estate, forming a cycle.