Ouch: Household wealth fell by $6.1 trillion from March 31 to June 30 - but adjusted for inflation, the financial hit was more like a record $8.7 trillion, columnist Rex Nutting explains. OPINION
U.S. households’ real wealth plunged at a record 20.9% annual rate to $143 trillion in the second quarter of the year, with modest gains in home values offset by high inflation and a big selloff in the stock market SPX, +1.53% DJIA, +1.19% COMP, +2.11%, according to data released Friday by the Federal Reserve and analyzed by MarketWatch.
While the Fed doesn’t directly target stock prices, policy makers know that higher rates generally hurt stocks and that the loss of wealth on Wall Street is one of the main ways the Fed can affect the economy on Main Street. Consumer spending could be reduced by hundreds of billions of dollars over the next year via this wealth effect.
Wealth is defined as the value of all assets owned by U.S. residents minus the value of their liabilities . Over the first half of the year, Americans’ real wealth dropped by $11.5 trillion. Still, real wealth has risen about $15 trillion since the prepandemic level in the fourth quarter of 2019, a 4.5% annual increase.
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