The stock market has been on a steady incline in recent months, with key stock indices hitting record high closings. This comes after the Standard and Poor's 500 index delivered an annual return of 11.74% in 2016.

Significant gains in the market are a boon for investors, but some are reaping more rewards than others. Wealthy investors who hold long positions in stocks are seeing the value of their portfolios increase on a scale that the typical investor may not be able to match.

Measuring the Rich-Poor Gap

Total family wealth in the U.S. totaled $67 trillion as of 2013, the most recent year for which statistical data are available. According to the Congressional Budget Office (CBO), the top 10% of families – meaning those who had at least $942,000 – controlled 76% of that wealth. Families in the top 50% accounted for 23% of total wealth, averaging $316,000 per family.  (See: A Brief History of Income Inequality in the United States.)

That means the remaining half of the population controls just 1% of the nation’s wealth. For families in the 26th to 50th percentile, average wealth totaled just $36,000. Those in the very bottom quarter had zero wealth and were in debt to the tune of $13,000 on average.

Those numbers reflect a broader trend in wealth distribution. Between 2010 and 2015, for example, the rich-poor gap, which measures the differences in annual household income between the top 20% of households and the bottom 20%, increased by $29,200. The U.S.Census Bureau data shows that as of 2013, the highest quintile households earned an annual income of $415,312 while the lowest quintile report an annual income of just $3,600.

In 2015, the bottom 99% of income earners realized the best real income growth in 17 years, but that growth was outpaced by the increases reported among the top 1% of families. Incomes for the bottom 99% rose by 3.9% over 2014 figures, but one-percenters saw their incomes increases by 7.7% during that same time period.  (See: Are You in the Top One Percent of the World?)

The CBO’s report tracks changes in wealth distribution back even further, to 1989. Overall, the distribution of wealth among households was greater in 1989, compared to 2013. Over a 24-year-window, the share of wealth held by families in the top 10% increased from 67% to 76%. The bottom half of families actually saw their wealth decline from 3% to 1%.

What’s Driving Unequal Wealth Distribution

Following the Great Recession, wealth declined across the board for all households, according to the CBO, but wealthy Americans saw the smallest drop in net worth. Through 2015, the bottom 99% of households had only recovered 60% of that lost wealth.

Slow wage growth may be a contributing factor to the widening disparity in household wealth. Economic Policy Institute data shows that wage growth has been relatively flat since 2009, increasing by 2.5% year over year. That’s below the EPI’s recommended target wage growth rate of 3.5% to 4%.

Having less disposable income impacts the ability of average Americans to take advantage of gains in the market. They’re less likely to have substantial stock holdings compared to higher quintile households, who are consistently earning six-figure incomes. Even if the market does pick up, the payoff in terms of portfolio growth is likely to be smaller.

At the same time, household debt is on the rise. Data from the Federal Reserve shows that household debt reached a new high in the first quarter of 2017, topping the previous peak reached in the third quarter of 2008. Mortgage, auto loan and student loan debt all increased over the previous quarter. Credit card balances declined slightly, but altogether, Americans still owe $764 billion to credit card companies.

The Bottom Line

The data indicate that the rich are, indeed, getting richer thanks to a combination of stock market gains, higher incomes and an increasing debt burden among middle and lower-income earning households. For those outside the top 10%, decreasing the wealth gap is challenging on several levels. Without significant changes in wages, the average family may have a harder time closing the distance between themselves and the wealthiest Americans. For more, see Rich Get Richer, But Savers Lose $1 Trillion.

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