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Trump needs a reminder that the stock market isn’t the economy

“I am having fun. I’m enjoying it. We’re accomplishing a lot,” Donald Trump told Forbes in a recent interview. Trump then immediately pointed to the accomplishment that appears to be on the very top of his mind. “Your stock market is at an all-time high.”

Trump is increasingly focused on the performance of the stock market. From Oct. 5 to 11, the US president tweeted about the strong stock market four times. He has tweeted about it 20 times since the beginning of July. It seems he needs a reminder that, as economists are fond of saying, “the stock market is not the economy.”

To recognize this distinction, Trump need only look to the latter portion of the Obama administration, when the stock market boomed and economic growth was relatively slow. The following chart shows that from January 2010 to April 2017, while the stock market, as measured by the performance of the S&P 500, grew by nearly 160%, GDP per capita grew by less than 11%. That equates to unusually rapid annual rate of about 14% for stocks—and an anemic 1.5% for the overall economy.

For an even more dramatic example of how stock performance and the fortunes of the average person can diverge, the chart below shows the growth of the stock market since 1970 versus the growth of average hourly earnings. Though the stock market grew by more than 300% in value, average hourly earnings barely budged.

Only about half of Americans directly benefit from an improving stock market. According the recent report (pdf) from the Federal Reserve, about 52% of US families owned stock in 2016, and only about one third of households who earn below the median income own stock. The report also shows that the top 10% of income earners own more than half of all stock.

Wall Street isn’t Main Street. Donald Trump shouldn’t delude himself.

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