One of the most interesting conundrums is the surging wealth gap in America. Despite two of the largest bull markets in history since 1980, most Americans struggle with making ends meet and are unprepared for retirement. Such a reality starkly differs from the belief that rising asset prices benefit the masses.

For example, in a recent St. Louis Federal Reserve Bank analysis, total household wealth was $139.1 trillion, covering 131 million families. Of that total wealth, 74% was owned by just 13.2 million families, or roughly 10% of the population.

Notably, this measure of wealth includes the equity of the family’s home. While home equity is essential, it is not readily spendable without taking on debt to extract the value. Therefore, Americans’ “liquid wealth” is far more unequally distributed. However, such is hard to fathom given the endless parade of media and social media influencers extolling the virtues of “building wealth through investing.”

Interestingly, that survey came after the Government injected nearly $5 trillion into the economy, a massive surge in deficit spending, and the Fed’s $120 billion monthly injections doubled asset prices from the March 2020 lows. Unsurprisingly, in February, Fidelity published its latest analysis showing the number of retirement accounts with balances of more than $1 million surged toward a record. To wit:

“The number of seven-figure 401(k) accounts at Fidelity Investments jumped 20% in 2023’s final quarter to 422,000, marking a sharp recovery from the previous quarter’s 7.7% drop.

Gains in the stock market helped swell retirement balances last year as the S&P 500 advanced 24% following 2022’s 19% decline. The impressive run was powered in large part by the so-called “Magnificent 7” stocks that now make up roughly 30% of the market-cap weighted S&P 500 Index. The only time when the ranks of 401(k) millionaires at Fidelity was higher was in 2021’s fourth quarter, when there were 442,000 such accounts. Elsewhere, the number of seven-figure IRAs is at a record 391,600 accounts.” – Bloomberg

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