Markets Are Rich. Are We?

There is perhaps no economic headline more seductive than this:

“The stock market reaches a new all-time high.”

The message seems obvious.

Markets are rising.

Companies must be doing well.

The economy must therefore be doing well.

And if the economy is doing well, people must be doing well.

Unfortunately, those are four different statements.

They sometimes move together.

Sometimes they do not.

And understanding the difference has become increasingly important because financial markets have grown enormously relative to the underlying economies they supposedly represent.

A stock index is not a country

The S&P 500 does not measure American living standards.

The DAX does not measure German household prosperity.

The FTSE 100 does not measure how comfortably the median British family lives.

An equity index measures the market value of a selected group of listed corporations.

Those corporations can operate globally.

They can increase profits while domestic wages stagnate.

They can automate jobs.

They can reduce headcount.

They can earn revenue abroad while their domestic economy struggles.

And their share prices can increase because investors expect higher profits years into the future.

There is nothing wrong with this.

That is what an equity market is supposed to do.

The mistake begins when we transform the market into a referendum on society.

The equation that does not exist

Stock market ↑ does not automatically mean:

real wages ↑

median disposable income ↑

purchasing power ↑

housing affordability ↑

social mobility ↑

household financial security ↑

The distinction sounds elementary.

Yet public economic debate repeatedly forgets it.

America demonstrates the paradox perfectly

The United States provides perhaps the clearest example because financial assets have become extraordinarily important to household wealth.

In the second quarter of 2026, U.S. household wealth increased by a record $12.8 trillion, according to Federal Reserve figures cited by Reuters. Roughly $10.7 trillion of that increase came from equities.

Household net worth reached approximately $196 trillion.

That sounds like an extraordinary broad-based enrichment of American society.

Until we ask who owns the shares.

The wealthiest 10% of Americans own more than 87% of equity holdings. (Reuters)

Suddenly the headline looks different.

The country became richer.

But the distribution of that additional wealth was extraordinarily uneven.

This is the central distinction between aggregate wealth and median welfare.

$10 trillion can appear without the median worker receiving a dollar

Suppose equity valuations increase dramatically.

The market capitalisation of companies rises.

Household net worth rises.

Pension assets may rise.

Founders and shareholders become wealthier.

None of this requires the hourly wage of a supermarket employee to increase.

It does not require rents to become cheaper.

It does not reduce electricity bills.

It does not automatically make childcare more affordable.

It does not necessarily allow a 30-year-old to buy a first home.

The aggregate national balance sheet can therefore improve spectacularly while the daily budget of millions of households barely changes.

Both statements can be true simultaneously.

But dismissing the stock market would be equally wrong

There is an opposite intellectual mistake.

Some critics treat rising equity markets as irrelevant financial speculation disconnected from society.

That is also incorrect.

Stock markets matter enormously.

They influence pension funds.

They determine companies’ cost of equity.

They facilitate capital raising.

They support acquisitions and investment.

They affect household confidence.

They create a wealth effect.

They influence consumption.

And increasingly in the United States, that wealth effect is economically significant.

Reuters’ analysis of the latest Federal Reserve figures notes that the top 20% of American earners now account for roughly 60% of consumption. Because financial wealth is concentrated among these households, equity-market movements can increasingly affect aggregate consumer spending and therefore GDP itself. (Reuters)

Here we encounter a fascinating reversal.

The stock market is not the economy.

But the economy can become increasingly dependent on the stock market.

The financialisation paradox

This creates what I would call the financialisation paradox.

As financial assets become larger relative to household income, market movements become increasingly important to aggregate economic activity.

But because those assets are unevenly distributed, the connection between market prosperity and median prosperity can simultaneously weaken.

A booming market can therefore support GDP while widening the psychological distance between economic statistics and everyday experience.

That helps explain a phenomenon frequently observed in developed economies:

“Why does everybody tell me the economy is strong when I don’t feel richer?”

Sometimes the answer is simply distribution.

GDP has the same problem

GDP is indispensable.

But GDP was never designed as a complete measure of human welfare.

If GDP per capita rises because profits surge while median household purchasing power stagnates, average economic output has increased.

That does not mean the median citizen experienced the same increase.

The same distinction applies to wealth.

Average wealth can rise dramatically because the richest households become substantially richer.

Median wealth can move very differently.

Whenever somebody says “Americans are richer” or “Europeans are poorer,” the first question should therefore be:

Average or median?

Income or wealth?

Nominal or real?

Before or after housing costs?

Before or after taxes?

Those distinctions frequently change the conclusion.

Global companies complicate national stock indices

There is another problem.

Large listed corporations are increasingly multinational.

A German company’s profits may depend heavily on China and the United States.

An American technology company can generate revenue across the planet.

A British index may contain businesses whose domestic British exposure represents only a fraction of their operations.

Therefore:

national stock index ≠ national economy.

An index can rise because multinational companies are performing brilliantly abroad while domestic households face weak wage growth.

Again, there is no contradiction.

We are simply measuring different things.

Markets look forward. Households live today.

Equity markets are also forward-looking.

Prices incorporate expectations about future earnings, interest rates, productivity and risk.

A stock market can therefore rally during a weak economy because investors expect conditions to improve.

Conversely, markets can decline while current economic data remain strong because investors expect deterioration.

Households operate on a different clock.

They experience today’s salary.

Today’s rent.

Today’s mortgage.

Today’s grocery bill.

Today’s taxes.

Today’s electricity bill.

Markets discount tomorrow.

Families pay today.

This temporal difference alone explains many apparent contradictions between Wall Street and Main Street.

Artificial intelligence makes the distinction even more important

The current investment cycle surrounding artificial intelligence provides an excellent example.

If investors expect AI to produce enormous future productivity gains, companies associated with the technology can appreciate dramatically.

Market capitalisation rises immediately.

But the social distribution of AI productivity gains may take years.

Who receives them?

Shareholders?

Highly skilled workers?

Consumers through lower prices?

Governments through taxes?

Or a narrow group of technology companies?

The answer will determine whether a financial boom becomes broad prosperity.

A productivity revolution and an equitable distribution of its gains are two separate economic questions.

What should we measure instead?

No single indicator can replace the stock market or GDP.

The solution is not to discard indicators.

It is to stop asking one indicator to answer every question.

To understand whether citizens are becoming more prosperous, I would look simultaneously at:

real median disposable income;

real wages;

housing costs relative to income;

household net wealth at the median;

employment;

household debt;

essential consumption costs;

productivity;

income distribution;

and financial-asset ownership.

Only then can we distinguish between a richer economy and richer citizens.

Markets are telling us something important

When equity markets rise persistently, they are telling us that investors expect the underlying companies to generate greater future cash flows or that the discount rate investors apply to those cash flows has changed.

That information matters.

But markets are not telling us whether a nurse can afford an apartment.

They are not telling us whether a teacher’s real salary increased.

They are not telling us whether a young couple can have children without destroying its finances.

They are not telling us whether the median household accumulated wealth.

Those questions require different data.

The uncomfortable conclusion

Perhaps we have become too accustomed to describing countries using the language of financial markets.

A record S&P 500 is good news for somebody who owns substantial equities.

A rising DAX can be good news for German corporate valuations.

A booming Nasdaq can signal extraordinary technological innovation.

But none of those statements automatically describes the living standards of the median citizen.

The distinction is becoming more important, not less.

In the United States, more than 87% of equities are owned by the wealthiest tenth of the population. At the same time, equity wealth is becoming increasingly important to aggregate consumption. (Reuters)

That gives us a rather strange modern economy.

Financial markets can become simultaneously more important to GDP and less representative of the financial experience of the median citizen.

Markets can be rich.

Corporations can be rich.

A country can be rich.

And still a surprisingly large share of its population can reasonably ask:

“When exactly do I become rich?”

That is not anti-market economics.

It is simply the difference between measuring the value of assets and measuring the economic life of human beings.

Roberto Balbino

CEO, Fintech SCB

Independent Analyst — Finance, Economics, Geopolitics & Global Markets

www.fintechscb.com