Main Street vs Wall Street – the inevitable fight

January 30, 2021

GameStop chaos from a broke renter’s perspective. 

A photo of Fearless Girl statue on Wall Street

Investors wondered what it would take to bring Wall Street down a notch as the stock market regularly climbed to records. It has been surreal, not the pandemic or even an insurrection at the U.S. Capitol could shake the climb. 

On Friday, the S&P 500 fell more than 1.9 percent, capping a stretch of volatile trading that left the index down more than 3 percent for the week — its worst week since late October…. because of GameStop.

The big words

Hold on… this showed me how clueless I have been with the world of investment. Market-savvy folks have been throwing out words such as hedge funds, market volatility, index, and short selling. The more I read, the more I realize that I know nothing. I have been living paycheck-to-paycheck and investing did not even cross my mind.

To put it in short, many average folks are being able to make money and beat Wall Street at their own game. They flocked together in a Reddit board called WallStreetBets, found some unloved stocks, such as GameStop, AMC, BB (BlackBerry), and encouraged others to buy the stocks to rally up the price. Sophisticated hedge fund managers have been betting against the company or – in a sense – short sell the stocks. When the stock price goes down, the hedge funds make a profit. But what happened when small investors get together and take on Wall Street? Wall Street lost billions of dollars in just a few days. A transition of wealth from Wall Street to Main Street ensued. 

But then again, the story isn’t all that fairytale-like. Whoever jumped late on the bandwagon could just as easily have ended up on the loser’s side, where they would have watched their investment shrink in half at fast-forward speed.

The Robinhood effect

These days, everyone has access to online trading platforms and financial market information. Public interest in the topic of investing surged once again in the year of the coronavirus. Ultra-low or no fees, innovations such as fractional shares, and the internet and social media make this access possible. For now, let’s stick to what we know best. 

After all, the “democratization of investing” is not without risks and side effects. And, investing is still not widely accessible by those who could have benefited most from it. 

Despite what transpired recently, one thing remains true. We’ve been saying for months that the stock market has completely disconnected from economic reality. And that is the stark reality. 

The renters outlook

According to a recent survey from Apartment List, 28 percent of renters carry rent debt from the previous months, and of those, 42 percent owe over $1,000 to their landlords. Rent debt and the burdens that come with it, are disproportionately found among minority tenants. Forty-one percent of indebted renters withdrew money from their savings, 29 percent accumulated credit card debt, 26 percent sold personal assets and 15 percent drew money from their retirement fund. The survey also indicated that indebted renters were more likely to owe money to those around them. Forty-nine percent of the tenants surveyed admitted to borrowing money from friends or family. 

Additionally, minority renters were shown to have far more stress surrounding their housing and financial situations as 31 percent of Black renters, 23 percent of Hispanic renters, and 19 percent of Asian renters polled as feeling either “very concerned” or “extremely concerned” about the threat of eviction. 

Despite what transpired recently, one thing remains true. The pandemic impacts on our economy will linger for the next few years. Economists have been saying for months that the stock market has completely disconnected from economic reality. 

The road to economic recovery will be a long one; slow but steady progress was made through much of 2020 until the year ended on a discouraging jobs report. This year the pandemic will remain a persistent threat to the health, finances, and housing security of our nation’s renters. And pre-existing economic inequality is compounding the problem for minority renters. People of color, who tend to work in occupations that are more prone to disease exposure and more susceptible to pandemic-related layoffs, are coming into 2021 with greater rent debt and more salient concerns about losing their housing once eviction protections expire.

So, what’s the moral of the story? It’s safe to say when it comes down to money, catching up on rent payments is at the top of my list. It’s an urgent need to address right away while hoping for a quick windfall from investing in stock remains uncertain.