Investor Facts: What Is Main Street?

Main Street is a synonym for the mostly non-financial parts of the U.S. economy, in contrast to Wall Street.

Investment commentators occasionally compare the concentrated U.S. financial sector with the larger, less finance-driven economy elsewhere in the country. They use “Main Street” to refer to the latter.

Many U.S. towns have a central business street named Main Street. The majority of Americans who live in small towns recognize the retailers and professionals who populate the businesses on Main Street as “the economy.”

Naturally, the U.S. economy is much larger and more complex. It includes huge agricultural interests, shipping, industry and suburban office buildings.

But most Americans understand the idea of Main Street as a metaphor for how the economy touches them directly vs. the arcane and distant world of finance represented by Wall Street, the traditional finance hub in lower Manhattan.

The terms “Wall Street” and “Main Street” are tremendously loaded. Often, investment professionals use the terms to discuss public policy that favors one at the expense of the other.

For instance, the stock market might hit a new, all-time high. Anyone with significant investments in U.S. companies would be pleased.

Nevertheless, many Americans own little or no stock. There are many more individual investors today than in years past. Yet just a little over half of us own stock at all, according to Gallup Poll data.

Thus the fact that stocks are higher has little bearing on their experience of the economy, which could be quite negative.

Two economies

Unemployment rates, wage growth and inflation matter more to ordinary individuals. Understandably, their concerns about the economy extend only as far as it affects their job prospects.

For the majority of non-investors, it matters much more that the shops on Main Street are in business and doing well. It means that employment among friends and relatives remains steady.

Likewise, a major decline in the value of stock investments has little meaning to the folks who relate mostly to Main Street.

The gap between these two experiences of the economy — between the large numbers of wage earners and smaller number who control wealth in the form of stock — can be a minefield for policy makers and politicians alike.

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