The Great ‘Vibecession’ Rages Through an $11 Trillion Stock Boom

Time and again, Jerome Powell has made it clear. Financial conditions, the Federal Reserve’s key lever for cooling the US economy, are tight.

After an $11 trillion rally in US equities since late October — and the sudden revival of meme-stock fever — many on Wall Street think he’s dead wrong. Not only are popular gauges of the investing climate famously loose — some are looser than before the Fed kicked off its historic monetary-tightening campaign more than two years ago.

Rather than help the Fed chair on his legacy-shaping mission to vanquish the inflation threat at its core, the objection goes, the market frenzy across risky assets is working against his policy goals by encouraging Americans to consume en masse.

Yet the latest Fed data on household wealth helps explain Powell’s sanguine stance on the link between financial conditions and the broader economy — and why consumer confidence remains stubbornly detached from the S&P 500 rally.

Put simply, the fruits of the market boom remain unevenly spread among Americans given epic disparities in wealth — especially across generations and racial groups — while equity gains are still modest when adjusting for the impact of inflation.

So while the stock market may be cheering up rich Americans, it’s doing little to invigorate the less affluent, who are trapped by inflation and struggling to cover debts thanks to sky-high borrowing costs.