Get the best daily market and macroeconomic commentary anywhere for less than $7 per month.
Already have an account? log in
$6 Trillion Down, $33 Trillion To Go
US households saw their net worth decline by more than $6 trillion in just three months during the second quarter. In absolute terms, it was the single largest one-quarter wealth shock in American history.
Fed data released Friday showed household wealth in the US dropped by $6.099 trillion during the period, as losses tied to a bear market in stocks more than offset another blockbuster quarter for property prices.
The decline eclipsed the wipeout catalyzed by the onset of the pandemic (figure
Bring on the 10yr sales
Is it really “correct to suggest the entirety of the pandemic wealth gains need to go”?? Rather, i would suggest that some portion…perhaps excepting some amount in line with healthy long term average increases…of gains measured against PRE-PANDEMIC.levels. Measuring vs. 2Q ’20 seems a bit like measuring my portfolio performance from the “Haynes Bottom” in 2009…
You’re absolutely right. The way I present it is a straw man of sorts. The problem (as you alluded to) is that it’s hard to say what the “correct” portion should be, and really there’s no “right” or “wrong” answer.
The only issue I have with measuring from pre-pandemic levels is that, if you recall, there was no shortage of “bubble” banter in February of 2020. 3400 SPX seemed very stretched at the time, so you could argue that something like 3000 SPX (i.e., pre-August 2019 trade war escalation peak) is more apt if what we’re trying to do is make a real dent without being draconian.
The truth is, I have no idea what the “correct” amount is, so for these articles (i.e., the quarterly household net worth coverage), I usually just employ the straw man to make it “fun” (with the scare quotes there to acknowledge that wealth destruction isn’t actually enjoyable).
Prior to the pandemic, the average 3 bedroom, 2 bathroom home in my area of Southern California cost about $750,000-850,000. About a year ago, the average price had risen to about $1.2 M. A couple of months ago, I looked at a projected value for my home on a real estate web-site, and it claimed my house was worth $1.6 M. (I nearly fell out of my chair laughing, as they have obviously never seen my home–it’s simply not worth that much!) A few weeks ago a very nice home in my area went up for sale at a cool $3.9 M (I don’t know what they were thinking, but imagine what that would have done to neighborhood comps?) It did not sell, and has since been pulled from the market. It would be nice to see the Fed somehow push real estate markets back closer to “normal” without collapsing the temple on its own head. How are young couples supposed to buy a starter home if they all cost $1 M or more?
The last boss I ever had (so, almost a decade ago now, which feels surreal to say), had a mansion just outside of Manhattan which, at the time, was worth several million. It was just him and a giant poodle roaming around in there, which was just as hilarious at it sounds. He had a real theater (not just a “theater room”) and an absurdly overwrought home office that looked like the cockpit in the Millennium Falcon. I have no idea if he still owns that gaudy monstrosity, but if he does, he’s probably sitting on an eye-watering windfall given the location and the pandemic bubble.
Then again, I read a couple of years ago in the press that he got married, and then quickly divorced. As any regular reader knows, I’ve never been married (or anything close to it), so I don’t know how the math works out, or what someone is entitled to if they marry into a house after the fact. That may have cost him his bubble gains.