Illustration: Aïda Amer/Axios

Tuesday's stock market record proves the definitive triumph of capital over labor in the era of COVID-19.

Why it matters: The recession has caused the size of the American economic pie to shrink substantially. But the share of that pie going to capital rather than labor has continued to rise.

Driving the news: The S&P 500 closed at a record high of 3,390 on Tuesday, a gain of 55% from its March low point in the space of just 105 trading sessions.

The big picture: It's easy to view the stock-market rally as happening despite the fact that more than 28 million Americans are claiming unemployment benefits. But perhaps the stock market is soaring in large part because of the continued unemployment crisis.

How it works: Historically, about two thirds of economic output went to workers in exchange for their labor, with the other third being retained by owners. But since 2000, that ratio has been plunging.

  • Now that America's workforce has been decimated by the COVID-19 pandemic, the share of national income being kept by workers could hit a new record low.

The bottom line: It's unclear how or whether workers will be able to regroup and reclaim more of the fruits of their labor. So long as capital retains the upper hand, an increasing share of corporate revenues will show up as profits. Which is good news for anybody owning stocks.

Go deeper

S&P 500 on the brink of a correction

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Data: FactSet, Chart: Axios Visuals

The S&P 500 hit its highest level ever earlier this month — but as September closes out, the index is teetering on the brink of correction territory.

Where it stands: As of Thursday’s close, the S&P 500 has sunk 9.3% below its record high. Slight gains on Thursday pushed it a bit further away from the 10% decline that would mark a correction — but investors say volatility could be here to stay.

Dan Primack, author of Pro Rata
Sep 24, 2020 - Economy & Business

The short-term economic impact of a Biden win

Illustration: Eniola Odetunde/Axios

We're 40 days away from the election, which means we're between 40 and 80 days away from knowing who won the election.

What happens next: The stock markets, which have spent most of 2020 divorced from the real economy, may tank — setting up a chain reaction that could impact everything from high-profile IPOs (e.g., Airbnb) to private market fundraising (denominator effect) to pending mergers (Delaware Chancery Courtnip).

Felix Salmon, author of Capital
Sep 24, 2020 - Economy & Business

The American economic paradox

Illustration: Aïda Amer/Axios

It's the rebound economists didn't see coming.

Why it matters: America did nothing that should have been necessary to really get the economy moving again. We didn't get the coronavirus under control, and we gave up on fiscal stimulus after a single short-lived round of it. Nevertheless, we're about to close out by far the strongest quarter of economic growth in American history.