By Ajay Raju

The US financial markets are booming, with major indices reaching record highs. The market gains, however, have overwhelmingly accrued to those who are already wealthy, accelerating inequality rather than creating broadly shared prosperity. The stock market and cryptocurrency—once heralded as wealth-building vehicles for ordinary Americans—have instead become powerful engines of wealth concentration, transforming paper gains into yachts for some while leaving the majority to watch from shore.

Market Rally

The 2024-2025 period has delivered exceptional returns to investors, with S&P 500 surging 23% in 2024, setting a series of record highs, with total returns including dividends reaching approximately 25% for the year, echoing the speculative fervor of the dot-com era. These gains occurred despite elevated interest rates that would typically suppress valuations, demonstrating the market’s resilience and investor enthusiasm for technological innovation, particularly compute infrastructure and artificial intelligence.

However, this rising tide is lifting boats unevenly. The recent rallies have exhibited extraordinary concentration in market leadership. For the full year 2024, only 19% of stocks within the S&P 500 outperformed the index itself because only a handful of mega-cap technology companies drove the vast majority of returns. This narrow leadership meant that even among stock owners, portfolio composition determined whether investors captured meaningful gains or merely modest returns.

Stock Ownership

A rally in the stock market, however, does not equal board-based national prosperity. Since 2023, an average of 62% of Americans report owning stock, whether directly or through retirement accounts. While this represents a rebound from post-financial crisis lows, it means that 38% of Americans—roughly 100 million people—have no stake whatsoever in equity market gains.

When you consider distribution among those who do own stocks, prosperity gets concentrated to even fewer people. 87% of upper-income Americans own stocks, followed by 65% of middle-income Americans, and 25% of lower-income individuals. Income determines not just whether Americans participate in the market, but how much they own. The wealthiest 10% of Americans own 93% of stocks, while the bottom 50% of Americans owned just 1%. This means that when the S&P 500 delivers a 25% annual return, that wealth creation accrues almost entirely to households that were already affluent.

Here’s the mathematical reality. A household with $1 million in stock holdings who experienced the 2024 rally gained approximately $250,000 in paper wealth. A household with $10,000 in holdings gained $2,500. A household with no stock holdings gained nothing, regardless of how productively they worked or how essential their labor was to the economy. When S&P 500 earnings were expected to grow 9.4% in 2024 and 14.8% in 2025, those profit increases translated to wealth for shareholders, not necessarily wage increases for workers who helped generate that productivity.

Compounding Wealth

This disparity among owners and workers creates a self-perpetuating cycle. Wealthy households that capture disproportionate market gains can reinvest those returns, purchasing additional assets that generate further appreciation. They can afford to hire financial advisors who optimize tax strategies, identify emerging opportunities, and ensure portfolios are positioned in the concentrated leadership stocks that drive outperformance. They can weather market volatility without being forced to sell at inopportune moments.

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Meanwhile, lower-income households face opposite pressures. If they manage to accumulate any savings, those funds often sit in low-yield savings accounts or are needed for emergencies. The psychological and practical barriers to stock market participation—minimum investment requirements, fear of complexity, lack of discretionary income—keep them on the sidelines. When they do invest, they often lack the capital to diversify effectively or access the same sophisticated vehicles available to accredited investors.

The 2024-2025 period crystallized this dynamic. Despite robust market gains, wage growth for typical workers barely kept pace with inflation. Those fortunate enough to have substantial retirement accounts saw their nest eggs swell, potentially enabling earlier retirement or greater financial security. Those working paycheck-to-paycheck saw their purchasing power essentially stagnate while reading headlines about record stock market wealth that might as well have been on another planet.

Crypto: Financial Democratization?

Meanwhile, for the outsiders looking in, an entirely disruptive way to generate wealth was growing in the shadows of the traditional markets: cryptocurrency, which entered the public consciousness with revolutionary rhetoric. Bitcoin and other digital assets were promoted as democratizing forces that would circumvent traditional financial gatekeepers—banks, brokerages, regulators—and offer ordinary people direct participation in a new wealth-building paradigm. The decentralized nature of blockchain technology supposedly meant that anyone with internet access could participate on equal footing, regardless of geography, income, or institutional connections.

The reality that emerged bears little resemblance to this egalitarian vision. Rather than flattening wealth hierarchies, cryptocurrency has created inequality that exceeds even traditional financial markets. Bitcoin’s structure as a fixed-supply asset with early adopter advantages has generated a wealth distribution that makes traditional capitalism look almost egalitarian by comparison.

As of October 2024, the top 100 Bitcoin holders controlled 14.54% of the total supply, the top 10 addresses accounted for 5.78% of all Bitcoins, while the top 100, 1,000, and 10,000 addresses held 14.84%, 33.21%, and 56.18% of the total supply, respectively. Many of these “whales” — early adopters who acquired Bitcoin when it traded for pennies or mere dollars — have amassed fortunes that dwarf most traditional wealth accumulations. When Bitcoin crossed $100,000 following the 2024 presidential election, it represented a watershed moment, but one whose benefits accrued primarily to those who were already crypto-wealthy rather than to average Americans seeking financial mobility.

Today, there are 240,000 crypto millionaires, 450 crypto centi-millionaires, and 36 crypto billionaires. These crypto investors represent a new class of wealthy individuals whose fortunes derive from digital rather than traditional assets, but whose economic behavior increasingly mirrors that of conventional high-net-worth investors. Crypto investors tend to also be active equity investors with similar consumption patterns. This overlap suggests that rather than creating new pathways to wealth for the economically marginalized, cryptocurrency has largely enriched individuals who were already positioned to take speculative investment risks—those with discretionary capital, risk tolerance, and financial sophistication. The average worker struggling with rent and groceries was not buying Bitcoin in 2011, when it traded at $1. They were not in a position to risk funds on an experimental technology with uncertain prospects.

Elite Gamblers

The populations that participated in early cryptocurrency adoption shared key characteristics: they had disposable income they could afford to lose, they possessed technological sophistication to navigate complex wallet systems and exchange interfaces, and they operated in social networks where cryptocurrency was discussed and promoted. These characteristics skew heavily toward already-privileged demographics—college-educated, employed in technology sectors, residing in developed economies with reliable internet access.

The narrative that cryptocurrency represents a democratizing force ignores these fundamental barriers to entry. For cryptocurrency to serve as an equalizing wealth-building tool, individuals would need surplus funds to invest speculatively, comfort with extreme volatility, technological capability to secure digital assets, and patience to hold through years of uncertainty. These prerequisites effectively exclude much of the global population struggling with basic economic security.

Elite Benefits

We have been here before. The pattern of democratized financial innovations primarily benefiting the already-wealthy has deep historical roots in American capitalism. The stock market itself was once promoted as a vehicle for ordinary Americans to share in corporate prosperity. Following World War II, the growth of pension funds and later 401(k) retirement accounts did expand participation, but ownership remained concentrated among higher earners who could afford to defer income.

The mutual fund revolution of the 1970s and 1980s promised accessible diversification for small investors. Index funds pioneered by Vanguard further reduced costs and barriers. Yet despite these innovations, the fundamental dynamic persisted: those with capital to invest benefited from market appreciation, while those living paycheck-to-paycheck could not participate regardless of how accessible the investment vehicles became.

The dot-com boom of the late 1990s offers particularly instructive parallels to the current era. Enthusiastic rhetoric about the democratizing potential of internet commerce created a speculative mania that did make some early investors wealthy. However, when the bubble burst in 2000-2001, it was typically retail investors—those who entered late, lacked sophisticated risk management, or couldn’t afford to hold through the downturn—who suffered the largest proportional losses. Sophisticated investors and insiders often exited near peaks, while ordinary investors bought at highs and sold in panic.

The 2024-2025 AI-driven market rally echoes these dynamics. The concentration of returns in a narrow group of mega-cap technology companies—the “Magnificent Seven” that dominated market narratives—meant that diversified portfolios underperformed concentrated bets. Yet making concentrated bets requires risk tolerance that comes from financial cushion. An investor with $10 million can afford to allocate $1 million to a high-risk, high-reward concentration and survive if it fails. An investor with $50,000 in total savings cannot afford the same proportional risk.

The Consumption Gap

The wealth effects from both stock market gains and cryptocurrency appreciation have tangible impacts on consumer spending and broader economic activity. Wealthy households that see their net worth increase by hundreds of thousands or millions of dollars do increase their consumption, purchasing luxury goods, real estate, and services. For example, the new crypto wealthy spent $200 billion in additional spending as a result of their new wealth, equating to approximately $0.10 spent on every $1 earned. This spending supports employment in certain sectors—high-end retail, construction, hospitality—but it’s spending that would not occur for households without asset appreciation.

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This creates a two-tier economy. In metropolitan areas with high concentrations of tech workers and finance professionals—Valley, New York, Seattle, Austin—the wealth effects from market gains drive up costs of living. Real estate prices rise as newly wealthy households compete for desirable properties. Restaurants and service providers raise prices to match what the local market will bear. This inflation in local costs then squeezes the service workers, teachers, nurses, and others whose wages haven’t appreciated comparably.

Meanwhile, in regions without comparable concentrations of asset owners, the stock market rally generates little local economic stimulus. Rural communities, post-industrial cities, and low-income neighborhoods experience the national inflation from supply chain issues and monetary policy without the offsetting benefit of wealth gains. Workers in these communities hear about record stock market returns and may feel the economy is thriving while their personal financial situations remain precarious or deteriorate.

Narrowing the Gap

Addressing this lopsided wealth concentration will require a comprehensive structural change to how Americans build financial security. The harsh truth is that capitalism, the best system available, effectively channels wealth-building opportunities to those who already have wealth, creating an aristocracy of capital ownership.

There are few successful examples of policy interventions that have helped broaden the distribution of capital ownership. Baby bonds—government-provided investment accounts for every child at birth—ensure all Americans begin adulthood with some investment capital. Expanded employee stock ownership plans give workers direct stakes in the companies they build. Sovereign wealth funds that distribute dividends to all citizens, as Alaska does with oil revenue, share resource wealth more broadly.

Of course, whether an economy where the primary mechanism for wealth accumulation is capital appreciation rather than wage growth can ever be truly inclusive is a different question entirely. When productivity gains flow predominantly to shareholders rather than workers, when technological advancement enriches capital owners rather than labor, the structural incentives favor those who already possess assets. The game is tilted in favor of few rather than many.

Yachts and Dinghies

The capitalist tide rises dramatically for those with large yachts—substantial stock portfolios heavily weighted toward technology winners. It barely nudges those in dinghies—households with modest 401(k) balances in diversified funds. And it leaves completely untouched those who couldn’t afford a boat at all—the 38% of Americans with no stock ownership.

The result is an acceleration of wealth inequality that will continue to compound over time. Each market rally will create further distance between asset owners from non-owners. Each technological revolution that drives stock appreciation will reward those positioned to own the companies rather than those who simply work for them. The self-reinforcing nature of this cycle—where wealth generates more wealth through compound returns—creates diverging economic trajectories that no amount of individual hard work can overcome for those starting without capital.

This is not an argument against capitalism, stock markets or technological innovation, all of which serve important economic functions. Rather, it’s a recognition that the current structure of ownership and wealth distribution means that market gains primarily benefit a privileged minority while being presented rhetorically as general prosperity. Until we address the fundamental question of who owns the productive assets of the economy, market rallies will continue to be rising tides that lift mainly yachts, leaving the majority to watch from shore as the gap grows ever wider.

(Ajay Raju, a venture capitalist and lawyer, is the author of The Review, a new column that attempts to decode the patterns emerging from the unprecedented shifts reshaping our world. In a world where adaptation is survival, The Review offers a compass for the journey ahead).