The 1% Now Hold $44 Trillion in Wealth: The One Asset That Led to Major Gains
Written by
Yaël Bizouati-Kennedy
Edited by
Cory Dudak
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America’s 1% is getting richer. As CNBC reported, the wealth of the ultra rich hit a record $44.6 trillion — a $2 trillion increase — at the end of the fourth quarter, according to new data from the Federal Reserve.
The main driver: the stock market rally.
“All of the gains came from their stock holdings. The value of corporate equities and mutual fund shares held by the top 1% surged to $19.7 trillion from $17.65 trillion the previous quarter,” according to CNBC.
In turn, the rising stock market is lifting consumer spending through what is known as the “wealth effect,” as CNBC explained — when consumers and investors see their stock holdings soar, they feel more confident spending and taking more risk.
“The massive increase in household wealth has been a powerful tailwind to consumer spending via the so-called wealth effect,” Mark Zandi, chief economist, Moody’s Analytics, wrote in a March 25 analysis.
Zandi further argued the U.S. economy‘s strong performance has helped propel stock prices and housing values higher. “In turn, those high prices have lifted household wealth, consumer spending and the economy,” he wrote.
Zandi explained that the Wilshire 5000, which measures the value of all U.S. publicly traded stocks, is up close to an “astonishing” 60% since the pandemic hit four years ago. And almost half this gain has come in the last six months, he added.
“As it became clear that the economy would not suffer the recession feared by many economists and investors, and inflation was receding enough to end Federal Reserve rate hikes. Indeed, the Fed is set to cut rates in the not-too-distant future,” he wrote.
He noted, however, that “prices look pricey and vulnerable to a correction, particularly as long as the Fed maintains a tight monetary policy.”
“While there are good reasons to think asset prices will hold more or less firm, there is a meaningful risk they will not,” he added.
The S&P 500 is up 10.6% year-to-date and 22% in the past six months.
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