True or false: The stock market = the economy. True or false: Wall Street = Main Street.

“False.” To both. The stock market isn’t the economy and Wall Street isn’t Main Street. Obviously. But there’s some important nuance, and it’s worth quickly revisiting in light of what I believe is a bubble in the equity market.

Analysts and bankers tend to equivocate on this issue depending on what they’re trying to convey. So for example, if you want to feign concern for the plight of everyday people, you might draw a chart like the one below.

That’s just BofA’s version of a chart you’ve seen plenty by now, including at least twice in these pages over the last four weeks. I use a different measure for “Wall Street,” but the message is the same.

The US economy’s “K-shaped,” as Michael Hartnett put it, in this week’s installment of his popular weekly “Flow Show” series. “Wall Street’s six times the size of Main Street.”

(Note that Hartnett’s always keen to highlight the “QE era,” a nod to the inegalitarian impact of the post-GFC policy mix which, until the pandemic anyway, was light on fiscal stimulus and heavy on monetary largesse.)

So far, so good, where that means I agree. But this gets convoluted when you remember that absurdly concentrated though financial wealth most assuredly is in America, the middle-class (and especially the upper-middle-class), nevertheless has a lot of their wealth tied up in financial assets.

Within that — i.e., within households’ financial asset holdings — is a metric ton of stock exposure.

As the figure above, from the same BofA note, shows, household equity allocations have never been higher.

Notwithstanding some definitional ambiguity around what counts as a “household” (the Fed’s data on that famously includes entities which definitely aren’t “households” on any definition of the term, let alone on a strict definition), the implication is that Wall Street is Main Street, at least a little bit.

That is unless you want to argue that the only households which count as “Main Street” are those with no financial assets at all. I doubt even the most committed liberal crusaders would suggest that in order to count as “regular” you have to be absolutely destitute, with no assets. Indeed, one of the harshest critiques of Wall Street during the GFC revolved around the idea that unbridled greed ended up decimating the 401(k)s of “good, hard-working people.”

Coming quickly full circle, Wall Street isn’t Main Street and the stock market isn’t the economy, but a stock market crash impacts households (“regular” people) all the same, particularly following a burst bubble. In fact, market crashes can impact Main Street disproportionately.

Think about it this way. If you have $1 million in stocks and you lose $400,000 in a crash, are you better or worse off than someone who had $100 million in stocks and lost $40 million in the same crash? The other guy lost 40 times more money than you had in the first place, but all else equal, you’re far worse off. Because the other guy still has $60 million in stocks, whereas you’re down to a measly $600,000.

Anyway, Goldman’s David Solomon offered the kind of profound cogitation we’ve all come to expect from him while discussing the prospect of a burst bubble during an event in Italy on Friday.

“I wouldn’t be surprised if in the next 12 to 24 months, we see a drawdown with respect to equity markets,” Solomon said. “And when that happens, people won’t feel good.”

That’s why he gets paid the big bucks, folks. That’s a $39 million pay package talking. Speaking of the distinction between Wall Street and Main Street.