Many people are wondering why Wall Street has recovered better than Main Street has.
Stocks have rebounded from their lows set during the financial crisis to reach record highs. So why isn't the "real" economy doing as well?
For one thing, stock gains have disproportionally gone to wealthiest Americans, who tend to own larger amounts of stocks.
Editor's Note: 18.79% Annual Returns ... for Life?
Fewer Americans hold stock-related investments now than 10 years ago,
CNNMoney reports, citing Gallup.
Some point to the Federal Reserve's monetary easing policy for the discrepancy.
"Monetary policy is a blunt instrument, not a surgical tool. It's much better at inflating assets than creating jobs," Kristina Hooper, U.S. investment strategist at Allianz Global Investors, tells CNNMoney.
"Only a small group has participated in this recovery. While we have made a lot of progress, it has been unevenly distributed."
Corporations, overall, have been slow to create new jobs, and many new jobs pay less than the ones lost did.
Some experts say uncertainty about government regulations and health care and tax policies prevents businesses from hiring.
"There is a vast array of uncertainty, which impedes the ability to plan. It's tough to navigate in a fog — and that's what has descended on businesses in America," Lawrence Creatura, vice president and portfolio manager at Federated Investors, tells CNNMoney.
Corporations are sitting on vast amounts of cash. Non-financial S&P 500 firms had $1.4 trillion of cash at the end of 2013, according to FactSet data cited by CNNMoney.
Instead of investing in new equipment or hiring more employees, corporations are buying back more stock and boosting their dividends, moves that don't improve the overall economy.
Jeff DeAngelis, chief investment officer of Northwestern Mutual Wealth Management Company, argues that the economy is better than it seems. Despite poor economic growth in the first quarter, new jobs are being created, he writes in an article for
Forbes.
"It can take time for consumer spending to restart, especially after a protracted period of unemployment. Workers first need to repay family and friends who helped them through their jobless time and also replenish their savings before they can feel like they have disposable income again."
When that happens, DeAngelis predicts, consumer spending will rebound, which will in turn increase economic growth and new hiring in a virtuous cycle.
More young people are finding jobs and moving out of their parents' homes and into apartments, he notes. That will increase spending and help the economy as they furnish their new apartments.
Editor's Note: 18.79% Annual Returns ... for Life?
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