• Stock market losses wipe out $9 trillion from Americans' wealth

    From zinn@21:1/5 to All on Wed Sep 28 09:17:21 2022
    XPost: alt.politics.economics, talk.politics.guns, alt.fan.rush-limbaugh
    XPost: sac.politics

    Falling stock markets have wiped out more than $9 trillion in wealth from
    U.S. households, putting more pressure on family balance sheets and

    Americans’ holdings of corporate equities and mutual fund shares fell to
    $33 trillion at the end of the second quarter, down from $42 trillion at
    the start of the year, according to data from the Federal Reserve. With
    major market indexes falling even further since early July, and the bond
    market adding further losses, market experts say the current wealth losses
    from financial markets could total $9.5 trillion to $10 trillion.

    Economists say the drops could soon start rippling through the economy,
    adding pressure to Americans’ balance sheets and possibly hurting
    spending, borrowing and investing. Mark Zandi, chief economist of Moody’s Analytics, said the losses could reduce real GDP growth by nearly 0.2 percentage points over the coming year.

    “The loss of stock wealth suffered to date, if sustained, will be a small,
    but meaningful headwind to consumer spending and economic growth in coming months,” Zandi said.

    The wealthy are bearing the largest losses, since they own an outsize
    share of stocks. The top 10% of Americans have lost over $8 trillion in
    stock market wealth this year, which marks a 22% decline in their stock
    wealth, according to the Federal Reserve. The top 1% has lost over $5
    trillion in stock market wealth. The bottom 50% have lost about $70
    billion in stock wealth.

    The losses mark a massive and sudden reversal for shareholders who saw
    record wealth creation from soaring stocks since the pandemic. From the
    market lows of 2020 to the peak at the end of 2021, America’s stock wealth nearly doubled, from $22 trillion to $42 trillion. The bulk of that wealth
    went to those at the top, since the wealthiest 10% of Americans own 89% of individually held stocks, according to the Federal Reserve.

    With stocks declining, and with those at the top bearing most of the
    losses, wealth inequality has fallen slightly this year. The top 1% owned
    31% of the nation’s household wealth at the end of the second quarter,
    down from 32.3% in the beginning of the year. The share of wealth held by
    the top 10% slipped from 69% to 68%.

    While Americans have gained wealth from rising housing prices, the gains
    have been more than offset by stock market losses. America’s housing
    wealth rose by $3 trillion in the first half of the year to $41 trillion.
    The gain is only about a third of the amount lost in the stock market. Yet
    with rising mortgage rates, home prices have started to decline or cool in
    many markets.

    The drop in stock wealth also far exceeds the $6 trillion in quarterly
    stock losses during the beginning of the pandemic in 2020. While stock
    markets have seen larger drops on a percentage basis, this year’s stock
    losses are among the largest ever on a dollar basis.

    The big question is how much the stock declines will impact consumer
    spending. So far, there are few signs that affluent consumers have cut
    their spending. Yet some say the “negative wealth effect ” — the theory
    that wealth declines lead to spending declines — could soon start to bite, especially if market declines continue.

    Zandi said lost stock wealth in the U.S. could reduce consumer spending by
    $54 billion in the coming year. Yet he added that the “stock-wealth
    effect” is smaller that in the past, since the wealthy own such a large
    share of stocks and have “have substantial excess saving built up during
    the pandemic.”

    “Since their saving cushion is so large, they won’t feel as compelled to
    save more given the decline in their stock wealth,” he said.

    https://www.cnbc.com/2022/09/27/stock-market-losses-wipe-out-9-trillion- from-americans-wealth-.html

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