The internet is buzzing about the latest Retail Sales report that shows a gradual slowdown in consumer spending. The buzz centers around the question of how can the S&P 500 be hitting all-time highs when retail sales continue to trend downward?
Some are speculating that the Democrat and Republican Establishments are working together to prop up the stock market (Establishment Market Pump Theory) because a market crash would guarantee Donald Trump a victory. Others counter that argument that such an act would require a massive conspiracy between the Federal Reserve and the wealthy on a scale never before seen in history.
Folks, I would not be so quick to dismiss the Establishment Market Pump Theory because it would require a massive conspiracy. With income inequality and the concentration of wealth in the U.S., pumping the market up ahead of an election is not as difficult as you might think. Most stock traders are not making the connection between the 30-year concentration of wealth trend, and how the stock market reacts to key economic reports.
The richest 20 Americans own more wealth than the entire bottom 50% of the country.
Wealth continues to concentrate more and more because of our political system. Today, no one can run for elected office without getting money from big corporations and the wealthy and powerful because it costs too much to run for office. When that person gets elected, they "pay back" that corporation by passing legislation which leads to a further concentration of wealth. Around and around the cycle goes.
Wealth has become so concentrated at the top that even the Retail Sales report that shows retail spending going down amongst the populace, even that is only a tiny fraction of the money financial firms have and that are pumping into the stock market on behalf of their wealthy clients.
Check out the terrifying video below of just how concentrated wealth has become in the U.S.
As a result of the concentration of wealth in the U.S., a significant divergence or disconnect has formed between fundamental economic data and stock markets. As you can see from the video above, it is quite easy for a relatively small number of wealthy individuals to get together and to keep the stock market rising until the Presidential election in November. No large conspiracy of people is required.
Wealth is so concentrated now in the U.S. that markets will continue to go higher until the wealthy pull out, which is a more intellectual definition of a honey badger market. As amateur stock traders, we just need to trade in the direction of the wealthy and powerful. Trying to short or bet against the concentration of wealth in this country is an incredibly dumb game to play. The concentration of wealth is so absolute that the rich will crush amateur traders like us.
The more I see the stock market go up after reports like the Retail Sales report, I'm growing more skeptical that the stock market will be allowed to crash before November. With the extreme concentration of wealth, the richest Americans can keep the market going up even when fundamental data on the economy like the Retail Sales report shows consumer spending in a multi-year downtrend.