When the Government Saves the S&P
US households now have a larger share of their net worth tied to the stock market than at any point in modern history.¹ So reported Yahoo Finance on April 3, 2026.
What would happen if U.S. stocks declined 40% and stayed there...that's a lot of disappointed people who are depending on robust 401(k) balances to enjoy the retirement they've been anticipating for decades...
And yet, U.S. asset valuations are high² (even by the lofty standards of the past 30 years), while global imbalances (debt,³ trade,⁴ and wealth⁵, for example) continue to grow. Which may mean more risk than usual.
Some have recently speculated that the stock market is now "too big to fail" and therefore a prolonged bear market will necessitate government action.⁶ That action could take the form of the Federal Reserve "stabilizing" the financial system - inclusive of the stock market - in the next crisis by purchasing stocks and ETFs. Recall that the Federal Reserve purchased corporate bonds and ETFs holding corporate bonds in the last crisis (Covid pandemic of 2020-21).⁷
So what's a director of the Hawaii Employees' Retirement System to do? Buy U.S. stocks, of course.
"I really hate to see us not taking advantage of the potential public equity rises," [board member David Louie] said. "Now, nobody can predict the future. But I view the public equity potential returns as strong. While there is some risk, I don't believe the government is going to allow that market to fail catastrophically."⁸
There it is. What many have suspected - that financialization has reached levels that will effectively require the government to step in to address a meaningful and sustained bear market in stocks - has now been said out loud.
Maybe investors have already caught on. The "buy the dip" ethos is remarkably persistent. Perhaps the idea of the "S&P 500 index as a government utility," and therefore the requisite response to a severe and sustained index decline, is already more widely appreciated than we thought.
1. https://finance.yahoo.com/markets/stocks/articles/us-households-never-more-exposed-065026128.html
6. https://www.msn.com/en-us/money/markets/the-us-stock-market-is-becoming-too-big-to-fail/ar-AA27HwhT
8. https://www.grantspub.com/resources/commentary.cfm - see entry for 09.17.2026
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