“Stock Market Gained $2T in Wealth Since Trump Elected”

That’s the headline on a Fox News insider report of Club For Growth founder Stephen Moore’s claim about one outcome of President Donald Trump’s election.  It’s certainly true that the market has run up hard since the election (although it’s had other periods of sharp gains, too, that are unrelated to elections).  Moore also was quoted as saying,

This could be the start of a big bull market rally[.]

There are a couple of things about this, one bigger than the other.  The lesser thing is that the stock market has been in a bull run for most of the year.

The bigger thing, though, is the misconception of “wealth” in the stock market.  The stock market has gained value, not wealth.  Wealth is what someone can spend on necessities and froo-froo, actual goods and services; stock shares aren’t those.  To turn that (gain in) value into actual wealth, all those higher priced shares would have to be sold for real dollars—and if everyone did that roughly simultaneously, most of that value gain would disappear in the selling.

2 thoughts on ““Stock Market Gained $2T in Wealth Since Trump Elected”

  1. Disagree somewhat. Wealth is normally defined (https://www.google.com/search?q=wealth&ie=utf-8&oe=utf-8) as including assets which have demonstrable value, including real property and business assets. Not all wealth need be liquid or even realized at the moment to have value.

    It is true that the non-realized, especially illiquid forms of wealth are vulnerable to revaluation (including rapid revaluation) as their markets change with events. But by standard definitions, the value of assets held in the stock market have (individually) appreciated substantially, increasing the (individual) wealth of their owners. And it’s also true that this appreciation is fragile until captured by selling those assets, with the cost of forgoing further appreciation (opportunity cost) as part of the deal.

    • Disagree somewhat. The “normal” definition of wealth–the counting of asset value as wealth–overstates the case. The value of assets, especially illiquid assets (the value of a home, the value of stocks owned, etc), is potential wealth, not realized wealth.
      Since the stock market has a measure of periodicity (see Elliot Waves, Fibonacci curves, and other such TA froo-froo), perhaps a pendulum analogy has some aptness.
      A pendulum swings back and forth, but not everywhere does it have realized energy. At the top of a pendulum’s swing, it is stationary and has no energy, for all that it has a potful of potential energy. That potential gains utility only when it has been realized, which is maximally done when the pendulum is at the bottom of its swing, moving at its maximum speed.
      It’s a loose analogy: to realize the pendulum’s potential wealth–its actual energy–one has only to let the pendulum swing from the top of its period. To realize our assets’ potential wealth–their value in acquiring stuff–one must sell the held stocks or the owned house.
      But markets are not as reliable as gravity, so the potential wealth aspect of assets should be taken with a grain of salt–and not counted as actual wealth.
      The stock market has gained $2T of value, of potential wealth, not actual wealth. And unlike with gravity, where increasing the number of pendulums (penduli? pendula?) swinging has no effect on any individual pendulum’s ability to convert its individual potential energy into actual energy, the more folks in the (housing or stock) market selling their assets to realize their wealth, the more diminished is the realized wealth because sale prices–the conversion process, markets’ “gravity”–are not nearly as constant as Einstein’s gravity.
      Eric Hines

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