A 2015 Comeback for the Middle Class?

One of the most interesting predictions I’ve heard made about 2015 is that this would be the year the economy finally outperforms the stock market in the US. Who knows, but I wouldn’t mind if that were the case. For one thing, it would help a lot of people who’ve been “left behind” by the new bull market because they simply don’t can’t participate. For another, it would defang the bubble-calling bears and provide some much needed “justification” for the ebullience apparent in the S&P 500 these past few years.

Stocks are only definitely expensive if they’re not foreshadowing a roaring economic comeback. If they are, then valuation becomes much more easily debated (should a market where corporate earnings are growing by 8%, rates are zero and inflation non-existent sell for less than 17x earnings? Why?).

The cartoon above, by Ed Gamble, demonstrates the current narrative about the lost middle class amidst a highly exclusionary economic expansion that favors capital owners versus workers. And all of the data backs it up, unfortunately, including Friday’s December NFP report which included more jobs but no wage growth. Henry Blodget posted some remarkable charts on the subject a couple of days ago that show a highly one-sided, completely unsustainable divergence between the top 10% of American income earners / captains of industry and everyone else. Here’s one, as an example:

WAGES AS A PERCENT OF THE ECONOMY (lowest in history)

But what if that’s on the verge of changing? What if there aren’t enough workers and wage pressure manifests itself across the economy for the first time in more than a decade? Under this scenario, it’s high plausible that the economy goes berserk while corporate earnings (and, by extension, stocks) take a pause as margins contract a bit.

Would that be so terrible?

Conor Sen has an interesting view on the potential for wage inflation in the near future that I’d encourage you to consider. Check it out at the link below:

The Biggest Looming Source of Inflation: Non-College Educated Men (csen)

Read Also:

Way To Go, ‘Capital’! You’re Totally Crushing ‘Labor’! A Few More Years Like This And You’ll Win!!! (Business Insider)