Let’s think about three different categories: housing, cars, and big internet stocks. Houses and cars are really important to think about, because they’re the most expensive purchases that people tend to make. And then internet stocks are important because they have been driving stock-market growth for the last few years. All of those look like they could pretty much recover or are already basically at higher levels than they were in January and February.
First, the housing market is doing bizarrely fine. New-home sales are higher than they were a year ago. Mortgage applications are higher than they were in late February. Home-construction projects based on some online marketplaces are higher than they were in January and February. In previous recessions—certainly the Great Recession—housing was just destroyed. And in this recession, housing is actually doing totally fine.
Then you look at something like cars. Right after houses, cars are the most expensive thing that people tend to buy in their life. And there’s every reason to think that the car economy is going to be pretty much fine as well. You have a lot of Americans that look like they’re going to move to the suburbs because people are going to be a little bit freaked out to live in crowded areas. And what do you need in the suburbs? Well, you need cars. There’s every possibility that you could have an auto recovery that is pretty much fine after the next year.
And then, finally, you have internet stocks, and they’re doing sensationally. I mean, the plague economy has basically shut down face-to-face interactions for large parts of the population, which means that if you do anything, you have to go online. Microsoft, Apple, Amazon, Google, Facebook, Cisco, Adobe—practically all of them have seen gains this year, and the gains of those large tech companies have essentially driven the stock-market recovery.
James Hamblin: Do you know what percentage of Americans have money in the stock market, apart from 401(k)?
Thompson: I don’t know apart from a 401(k)—because I do think, for a lot of people, that’s the most important way that they’re invested—but stock-market wealth is highly unequally held. Something like 90 percent of stock-market wealth is held by, I think, the top 8 or 9 percent of Americans.
Hamblin: I think I maybe understand a little bit more: Some companies are doing well enough that, overall, the average of the stock market doesn’t look that bad. In fact, it looks really good, because it’s recovering from that big crash in March. But certainly some things have taken big hits and, overall, money maybe just moved to sectors that are more in line with what’s needed in pandemic life.
Thompson: I think that’s a great summary.
Hamblin: In the past, or in an alternate universe where more people held stocks and they were suddenly feeling widespread economic insecurity, they might sell their stocks. They might feel they need money now, so they cash out of the stock market. And then the stock market could crash because people needed liquid money right now because they just lost their job.