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In fact, the wealth (assets) and net worth (the difference between assets and liabilities) of households and nonprofit organizations (these two groups are traditionally lumped together in statistics) Set new records ($181.4 trillion and $160.8 trillion in the first quarter)Americans, in general, are systematically getting richer (at least in nominal terms, since in recent years that growth has been dragged down more by inflation).
What is most interesting is what is happening in the structure of this property. Traditionally, I have paid particular attention to the fluctuations in the stock value of public companies. This value hit an all-time high of nearly $60 trillion in the first quarter (The Fed’s calculation includes stocks held directly and indirectly, such as through investments and pension funds).
That nearly $60 trillion is 28.1% of all assets held by households and nonprofit organizations. Is this (too much)?
The rest of the article is below the video
See also: The millionaire in the funeral industry. He reveals the details of the business – Tomasz Salski in Business Class
Records are made to be broken
Let’s start with some longer context. Over the 70 years covered by our chart, the share of stocks has structurally been slowly rising (as shown by the rising long-term trendline). This is not surprising, as U.S. stocks have long been one of the best ways to grow wealth..
The problem, however, is that sometimes the share of stocks in the statistical portfolio deviates too far from this trend, and of course this happens during very strong bull markets, only to be corrected downwards at the beginning of a bear market. We have experienced this in recent years.. The share of stocks in wealth rose to a record during the post-COVID bull market in 2020-21, but corrected with the start of the bear market in 2022.
What may be a little disturbing is that the asset share climbed again to quite high levels in the first quarter of this year. The above value of 28.1% is already quite close to the 2021 record of 29.2%. One could guess that in the second quarter that is just about to end, this ratio got even closer to the record as the S&P 500 has continued to climb recently on a wave of excitement about AI.
Of course, records are meant to be broken, and this situation is not ruled out, but it is also easier to fall from such a high ceiling.
The author is Tomasz Hońdo, Senior Economist at Quercus TFI SA
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