Do You Feel $5 Trillion Richer Than You Were In December?

Do You Feel $5 Trillion Richer Than You Were In December?

US households are $5 trillion richer than they were at the end of 2020. In aggregate, anyway.

That’s according to the latest Z.1 report, out Thursday.

In the 12 months since the largest quarterly collapse in history (a $6.5 trillion contraction in the first quarter of 2020, when the pandemic collapsed the stock market and plunged the world into a fleeting depression), American households have seen their collective net worth balloon by almost $26 trillion. The figure (below) is quite something.

Needless to say, you can thank the Fed for quite a bit of what you see in the chart. The breakdown (figure below) shows the value of stocks jumping more than $3 trillion over the first quarter, while real estate chipped in almost $1 trillion. Only debt was a drag.

After a $7.6 trillion wipeout during the first quarter of last year, households have enjoyed an uninterrupted surge in the value of equity holdings. The rolling, four-quarter gain is $17.7 trillion.

During the four quarters since the March 2020 panic, US equities surged some 75% in one of the most astounding rallies ever recorded. That wouldn’t have happened without the Fed. Period.

Over the same period, pandemic dynamics catalyzed a flight to the suburbs, driving up the value of homes. Simultaneously, the Fed’s efforts to support the economy were gas on the fire (figure below) and mortgage rates plunged to record low after record low.

Of course, most of this is wholly irrelevant to (too) many Americans (see what I did there?). As Bloomberg put it in their coverage Thursday, “many people aren’t benefiting from recent gains in wealth.”

To call that an understatement would be… well, an understatement of its own.

“While the pandemic has led to a surge in savings and opportunities for many to buy a home or invest, the downturn has disproportionately impacted low-income workers, many of whom rent and don’t participate in the stock market,” the same linked article added, flatly.

Note that the total share of net worth controlled by the top 1% dropped to an eight-year low in Q1 of 2020, but has since rebounded to within a tick of the record high hit in 2016. Meanwhile, the “merely” rich’s share has been mostly stagnant for five years, and is well off the highs hit in 2009.

The spread between the 90th-99th percentile’s share and the 1%’s share is now approaching the lowest in 20 years (figure above).

By way of reminder, the 1% had a 31.4% share of total net worth as of March 19. The 90th-99th percentile’s share was 38.2%. The bottom 50% of Americans controlled just 2%.

As for the middle class, well, the figure (below) speaks for itself.

Don’t worry, Joe Everyman and Plain Jane, you can always hit it big with AMC.


 

2 thoughts on “Do You Feel $5 Trillion Richer Than You Were In December?

  1. There were additional transfers of wealth from property owners to the (primarily) lower income citizens.
    According to an article published by US News on May 17, 2021, there were 5.7M households who were behind on their rent. The amount of rent owed was approximately $20B. This is $20B which renters did not have to pay.
    I continue to think that this was one of the most poorly handled issues resulting from the pandemic. The “rule of law” is the backbone of the US and the USD and such rule of law was not upheld. I am not suggesting that evictions should have been allowed but if the government steps in to temporarily halt evictions, the landlords should have been made whole. Surely the government could have printed an additional $20B for landlords, many of whom were individuals, and not corporate entities.

Speak your mind

This site uses Akismet to reduce spam. Learn how your comment data is processed.