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Ray Dalio has spent a lot of time and verbiage wringing his hands over income inequality. He’s afraid it’s going to lead to civil unrest and war if something’s not done about it.

Well, according to Oliver Wyman’s Jacques Cesar, he should also be pretty worried if something is.

The rich save more and are more willing to take the extra risk of putting their savings into stocks…. Raise inequality and demand for stocks goes up, and so do prices….

“There’s a duality,” Mr. Cesar says. “Ultimately they’re two faces of the same coin. [Company] earnings are both cause and consequence of high income inequality.”

On the bright side, given our national political stalemate—and conspicuously different from the 1930s Dalio fears we’re all reliving—nothing’s going to be done about it. And so while society may eventually collapse into a Mad Max-like anarchy, the going’s still gonna be good for the haves for a little while, at least.

Cesar reckons a major shift toward more equality is highly unlikely at the 2024 election, which should allow valuations to maintain the higher levels that set in after Reagan.

Inequality in Society Drives Stock-Market Performance [WSJ]


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