Bull case on a stock crash sees end of Fed gifts to wealthiest

One of many things to break in last year’s market rout was a decade-long stretch in which gains in stocks overwhelmed gains in wages.amid the toughest Federal Reserve tightening campaign in 40 years.

“The worst that can happen to an economy is inflation. It destroys everything,” Jim Bianco, founder of Bianco Research, said in an interview. Deluard’s view is that the current tightening may be the first break in a long cycle where the Fed rushed to the aid of an already-affluent investing class at every sign of trouble. One way the disparity could narrow is if — somehow — the robust growth in wages that has occurred in the last two years survived a Fed onslaught that kept a lid on assets.

“That was a partial unintended consequence,” he said. “The Fed knows well that the wealth effect is one transmission mechanism for policy. So, if it made equity holders richer for the benefit of the greater good, then I guess that was OK. Now the opposite has happened with Fed policy tighter and likely to remain tight.”While stock ownership rates among the lowest-earning workers have gone up over time, they remain tiny compared with rates of those with higher incomes.

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