According to fresh data from the Federal Reserve, the wealthiest 1% of Americans reached a record $44.6 trillion at the conclusion of the fourth quarter as a result of a year-end stock market boom that boosted their portfolios.
The Fed's definition of the top 1% is individuals with fortunes exceeding $11 million, and their combined net worth climbed by $2 trillion during the fourth quarter. Their stock holdings accounted for all of the profits. The top 1%'s holdings of mutual fund shares and corporate equity increased in value to $19.7 trillion from $17.65 trillion in the previous quarter.
All other gains outside of stocks were effectively cancelled out when the value of their privately owned enterprises decreased and their real estate values increased little.
The Covid-19 pandemic market increase in 2020 initiated an unparalleled wealth explosion, of which the quarterly gain was the most recent addition. The wealthiest 1% has risen by around $15 trillion, or 49%, since 2020. The middle 50% to 90% of Americans have seen a 50% gain in wealth, reflecting a growing wealth wave that has also benefited the middle class.
Economists claim that the "wealth effect," which is caused by the soaring stock market, is driving up consumer spending. Consumers and investors feel more comfortable spending more money and taking on greater risk when they witness a surge in their stock holdings.
“The wealth effect from surging stock prices is a powerful tailwind to consumer confidence, spending and broader economic growth,” said Mark Zandi, chief economist of Moody’s Analytics. “Of course, this highlights a vulnerability of the economy if the stock market were to falter. This isn’t the most likely scenario, but it is a scenario given that stocks appear richly (over) valued.”
However, the most recent data also emphasises how top-heavy stock ownership is still in the United States. The Fed research states that 87% of mutual funds and personally held stocks are owned by the wealthiest 10% of Americans. Half of all equities held by individuals are owned by the wealthiest 1%.
According to economists, an increasing stock market disproportionately benefits the wealthy, primarily driving up the upper echelons of the consumer and spending markets. More than stocks, salaries and property values determine the wealth of Americans in the middle class and lower income categories.
“Those households in the top one-third of the income distribution and who own the bulk of the stock holdings account for approximately two-thirds of consumer spending,” Zandi said.
According to Liz Ann Sonders, chief investment strategist at Charles Schwab, the top 1%'s assets are increasingly made up of equities. By the end of 2023, stocks made up 37.8% of the top 1%'s total household assets, up from a recent low of 36.5%.
However, Sonders noted that the increased stock wealth for the 1% may not have a significant effect on the consumer sector since the wealthy don't need to spend as much of their gains—a phenomenon known as the marginal propensity to consume.
She mentioned that the Conference Board reports that since 2017, consumer confidence among individuals earning above $125,000 annually has been on a "secular decline."
“While the bump in stock prices might link to stronger confidence, it doesn’t necessarily point to stronger spending at the higher end,” she said.
By the end of 2023, the wealth of the elite echelon is probably going to have surpassed the record, since the S&P 500 has already increased by 10% this year. After a minor drop in 2021 and 2022 due to rising salaries and rising house prices, the wealth gap has returned to levels seen before to the epidemic.
At the end of the fourth quarter, the wealthiest 10% of the population had 67% of all wealth, while the top 1% held 30% of the country's total wealth.
(Source:www.cnbc.com)
The Fed's definition of the top 1% is individuals with fortunes exceeding $11 million, and their combined net worth climbed by $2 trillion during the fourth quarter. Their stock holdings accounted for all of the profits. The top 1%'s holdings of mutual fund shares and corporate equity increased in value to $19.7 trillion from $17.65 trillion in the previous quarter.
All other gains outside of stocks were effectively cancelled out when the value of their privately owned enterprises decreased and their real estate values increased little.
The Covid-19 pandemic market increase in 2020 initiated an unparalleled wealth explosion, of which the quarterly gain was the most recent addition. The wealthiest 1% has risen by around $15 trillion, or 49%, since 2020. The middle 50% to 90% of Americans have seen a 50% gain in wealth, reflecting a growing wealth wave that has also benefited the middle class.
Economists claim that the "wealth effect," which is caused by the soaring stock market, is driving up consumer spending. Consumers and investors feel more comfortable spending more money and taking on greater risk when they witness a surge in their stock holdings.
“The wealth effect from surging stock prices is a powerful tailwind to consumer confidence, spending and broader economic growth,” said Mark Zandi, chief economist of Moody’s Analytics. “Of course, this highlights a vulnerability of the economy if the stock market were to falter. This isn’t the most likely scenario, but it is a scenario given that stocks appear richly (over) valued.”
However, the most recent data also emphasises how top-heavy stock ownership is still in the United States. The Fed research states that 87% of mutual funds and personally held stocks are owned by the wealthiest 10% of Americans. Half of all equities held by individuals are owned by the wealthiest 1%.
According to economists, an increasing stock market disproportionately benefits the wealthy, primarily driving up the upper echelons of the consumer and spending markets. More than stocks, salaries and property values determine the wealth of Americans in the middle class and lower income categories.
“Those households in the top one-third of the income distribution and who own the bulk of the stock holdings account for approximately two-thirds of consumer spending,” Zandi said.
According to Liz Ann Sonders, chief investment strategist at Charles Schwab, the top 1%'s assets are increasingly made up of equities. By the end of 2023, stocks made up 37.8% of the top 1%'s total household assets, up from a recent low of 36.5%.
However, Sonders noted that the increased stock wealth for the 1% may not have a significant effect on the consumer sector since the wealthy don't need to spend as much of their gains—a phenomenon known as the marginal propensity to consume.
She mentioned that the Conference Board reports that since 2017, consumer confidence among individuals earning above $125,000 annually has been on a "secular decline."
“While the bump in stock prices might link to stronger confidence, it doesn’t necessarily point to stronger spending at the higher end,” she said.
By the end of 2023, the wealth of the elite echelon is probably going to have surpassed the record, since the S&P 500 has already increased by 10% this year. After a minor drop in 2021 and 2022 due to rising salaries and rising house prices, the wealth gap has returned to levels seen before to the epidemic.
At the end of the fourth quarter, the wealthiest 10% of the population had 67% of all wealth, while the top 1% held 30% of the country's total wealth.
(Source:www.cnbc.com)