Household Net Worth rises to $156T

[mnfish]

www.federalreserve.gov/releases/z1/20240307/html/recent_developments.htm

"The net worth of households and nonprofit organizations increased by $4.8 trillion to $156.2 trillion in the fourth quarter. The change in household net worth was primarily driven by an increase in the value of directly and indirectly held corporate equity, which rose by $4.7 trillion in the fourth quarter."

"Directly and indirectly held corporate equities ($47.5 trillion) and household real estate ($44.8 trillion) remain the largest components of household net worth."

IMO, this is part of the reason inflation has been and will remain sticky. People still feel wealthy.

[steelpony10]

      Graph VTI or VOO. Markets are just recovering from a big dip in 2022-2023.

       In the future when inflationary rates go down I’ve never seen prices go down. If your rate of return is currently over 5%+ or an indefinite period in skinflint mode one should be good.

[Mustang]

Apr 2, 2024 14:50:19 GMT steelpony10 said:

      Graph VTI or VOO. Markets are just recovering from a big dip in 2022-2023.

       In the future when inflationary rates go down I’ve never seen prices go down. If your rate of return is currently over 5%+ or an indefinite period in skinflint mode one should be good.

If inflation goes to zero prices will not go down.  They simply stay the same.  In order for prices to go down we would have to have deflation. Since the Fed is hoping to get to 2% inflation, prices will never go down.

Note: Disinflation is a slowing down of inflation.  Prices are still going up but at a slower rate.  The Fed is trying to force disinflation to get down to a 2% inflation rate.

[steelpony10]

Mustang ,

     I feel wealthy. I just keep spending because as a 1970’s survivor I’ve used that as my worse case scenario or target for 45+ years. As you mentioned for example cars went from 7k to 9k during that time.

      I just compare myself to other retirees and younger two income families saving for retirement and now stuck with paying for children’s college tuition and maybe room and board, 100’s of thousands of dollars maybe comparable and before end of life issues.

       From what I see and read non investors are doomed and the more well off are wallowing in debt.

[Mustang]

A new definition of wealthy? Being able to pay bills with a little left over?

I hope it doesn't come to that. I want that to be the definition of the lower middle class. I want the middle class to be aspiring to be wealthy. And we need to create an economy where that is possible.

P.S.  I remember the 70s. Inflation so high that US auto manufacturers (the Big Three) were cutting costs to a point where new cars leaked oil on the showroom floors, hoods were not flush with fenders, etc.  Pitiful quality and high comparative prices.  Imports starting gaining sales in the US market as their product quality improved.  They gained a large enough market share that Toyota and Honda are now made in the US.  Toyota replaced Dodge in NASCAR.

[bb2]

Far as I can tell, cost of buying a home has about doubled the pace of inflation. One wish is that the schools would teach personal finance at a youngish age; resulting in better decisions. Maybe then the kids wouldn't be asking the parent for a pet. (I only mention pets because that's an area I work in.) I'm starting to watch home builders.

[gman57]

Apr 11, 2024 18:44:36 GMT bb2 said:

 One wish is that the schools would teach personal finance at a youngish age; resulting in better decisions. 

One of if not the largest failure in our educational system IMHO.

[archer]

I remember in the mid 60's when I was in 7th grade a mandatory part of the curriculum was a partial year course in "home economics". However there was nothing taught in the class about economics. We learned a little about cooking and sewing, but nothing about money. I have no idea why the course was titled as it was.

[acksurf]

Apr 12, 2024 0:49:19 GMT archer said:

I remember in the mid 60's when I was in 7th grade a mandatory part of the curriculum was a partial year course in "home economics". However there was nothing taught in the class about economics. We learned a little about cooking and sewing, but nothing about money. I have no idea why the course was titled as it was.

I am bit younger than you and had home economics and industrial arts in the 70s.  At a high level, cooking and industrial arts did introduce an ethic of self sufficiency; don't have to rely on somebody else for "home" basics.  However, we also did have to plan and budget for materials.  No cake if you go over budget and can't buy the eggs!

[mnfish]

From the OP - "The change in household net worth was primarily driven by an increase in the value of directly and indirectly held corporate equity, which rose by $4.7 trillion in the fourth quarter."


www.jpmorganchase.com/institute/research/financial-markets/the-stock-market-and-household-financial-behavior - written in 2021 but interesting

Finding One: Consumer spending is responsive to stock market movements, led by spending bursts on credit cards.
In our credit card sample, a 10 percent rise in stock prices is associated with a rise in average spending of just under 1 percent.

Finding Two: The spending response to stock market movements is stronger for customers identified as male investors than for non-investor men and for women

Finding Three: Flows into investment accounts are notably sensitive to changes in the stock market—a 10 percent rise in stocks translates to a short-term increase in the magnitude of transfers of over 10 percent for both men and women—showing a pattern of returns chasing.

Finding Four: The COVID shock to the economy, which strongly dampened consumer spending, resulted in a large spike in transfers to investment accounts, especially for men. (See stimulus)

However, stock market gains are associated with spending “splurges” on credit cards and flows into investment brokerage accounts, suggesting that stimulus aimed at supporting asset prices can come with costs in the form of households’ financial vulnerability.

****
Looking at Fred charts - In 10 years, both the total public debt and household net worth have doubled. Credit card debt is up 74%. SP500 is up 226%. If the "punch bowl" is truly being taken away, it doesn't seem to bode well for the economy or the market.

[mani]

Apr 2, 2024 12:36:00 GMT mnfish said:

IMO, this is part of the reason inflation has been and will remain sticky. People still feel wealthy.

Yes.

I am not sure how this thread went for fairly good news to doom and gloom.
It seems people love to complain but people live lives our parents and grandparents could only have dreamed of.

I am middle age with a young kid and our household gets to save plenty while living our best lives. No car payments or silly expenses but plenty of great vacations and the sense I am living in an incredibly easy period of history. Some people just need to reset their expectations.

Kids also are smart about money despite what you hear. They get more exposure to "the hustle" than I ever got. It's all over the internet. My 6yo complained last night that I was putting his hotwheel garage for free on the sidewalk in front of the house during the evening commute (hoping it gets picked up). He wanted me to list it for $20. He knows exactly how much is in his saving account and how much is the house he dreams of buying

[mnfish]

Not that it matters, but David Rosenberg agrees -

"The bull market in economic growth boils down to the heavy hand and generosity of Uncle Sam," he said in the note.

"The boom in real estate and equities has pushed the level of household net worth up an incredible $11.6 trillion (+8%) over the past year, and this stash of wealth has encouraged consumers to spend more and more out of current income. Highly reminiscent of what happened in the late 1990s," he added.