A widening wealth gap has been a deepening challenge, worsened by the pandemic. Some 2,200 billionaires saw their net worth grow by $2 trillion in 2020, while 435 million people in low-income communities around the world lost ground, said Rockefeller Foundation President Raj Shah last week at Barron’s two-day event on the topic.
The numbers are eye-opening, and the problem itself, like the global economy, is complex, interconnected, and systemic. Solutions must come from many fields: health care, education, race relations, criminal justice, housing, and finance. Observed Leana Wen, a public health professor at George Washington University: “Covid did not create inequalities, but it did unveil them.”
Since the pandemic began, millions of children, disproportionately from low-income families, have missed school. Minority families often live in multigenerational households, have preexisting conditions, work essential jobs, and lack internet technology. For all its wealth, the U.S. must reduce dropout rates and college costs, and provide quality pre-K services, argued former Obama education secretary Arne Duncan, now at the Emerson Collective. Punitive criminal justice policies worsen problems.
And there are money issues. “For every dollar invested in entrepreneurs, founders of color and women get less than 4%,” said Morgan Stanley’s Alice Vilma. Meanwhile, poorer communities are underbanked, have less access to mortgages (and homeownership), and, vitally, capital. Said Brandee McHale of the Citi Foundation: “Any solutions will need to be comprehensive and long term. It can’t be one and done.”
Last Week
The Big Squeeze
Stocks were volatile as a big earnings week dawned. Monday saw year-to-date volume highs, fueled by GameStop —or as Tesla’s Elon Musk tweet-cheered, “Gamestonk!!”—which rose 18%, 93%, then 135%, before falling 44% on Thursday, as day traders on Reddit’s WallStreetBets page battled Wall Street shorts. One hedge fund, Melvin Capital, backed off, requiring a rescue loan. The short squeeze spread and some online brokers curbed trading. Game over? Probably not. In an ugly week, the Dow Jones Industrial Average lost 3.27% to 29,982.62; the S&P 500 shed 3.31% to 3714.24; and the Nasdaq Composite dropped 3.49% to 13,070.69.
The Q4 Scorecard
A third of the S&P 500 reported fourth-quarter earnings. These included big engines of the market: Apple, Facebook, and Microsoft ; Verizon and AT&T ; McDonalds and Starbucks ; Tesla and General Motors. Microsoft, Facebook and Apple had blowout numbers—and fell; Starbucks saw sales slip over the holidays, but recover in China; Tesla made a profit for the year, and GM said it would go all-electric by 2035.
Vaccines and Variants
Covid numbers improved. Deaths fell to “only” 3,000 a day as the total neared 435,000. President Biden promised 1.5 million vaccinations a day, and said the federal government would buy 200 million more doses of the Moderna and Pfizer vaccine to fill in a shortfall, enough for 300 million vaccinations by summer. Merck shut down two vaccine trials; Moderna warned its vaccine was less effective against new strains; and Johnson & Johnson said its vaccine was 72% effective in the U.S.
Trials and Tribulations
President Trump’s Senate impeachment trial begins Feb. 8, despite 45 Republicans voting against holding one at all. In his last weeks as president, Trump discussed replacing the acting attorney general with an ally in the Justice Department who would try to overturn the Georgia presidential vote. Trump was deterred only after senior DOJ leadership said they would quit.
A Shift in the Senate
In the Senate, Democrats with a one-vote majority in tiebreakers took control after GOP leader Mitch McConnell backed off demands that Democrats promise to preserve the filibuster. He agreed to power-sharing rules from the last 50-50 Senate, in 2001. President Biden signed more executive orders, including plans to encourage buying U.S. goods and end oil-and-gas drilling on federal land.
Apollo’s Black Steps Down
Apollo Global CEO Leon Black is stepping down after an investigation confirmed he had paid Jeffrey Epstein for financial advice but cleared Black of any involvement in Epstein’s crimes. His successor as CEO: cofounder Marc Rowan….Starbucks COO Rosalind Brewer was named CEO of Walgreens Boots Alliance. She’s the only Black woman to lead a Fortune 500 company.
Write to Evie Liu at evie.liu@barrons.com
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January 30, 2021 at 07:54AM
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Tackling the Wealth Gap Isn’t a Single Challenge, But Many Interconnected Ones - Barron's
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