The net worth of American households dropped by $6.1 trillion in the second quarter of 2022, triggered by a decline in the stock market, according to a latest report by the Federal Reserve.
The $7.7 trillion fall in stock holdings followed a $2.95 trillion decline in the first quarter and reflected the overall bearish trend of the markets in 2022. The S&P 500 Index is trading lower by more than 15 percent year to date, as of Sept. 9.
The $1.46 trillion jump in real estate holdings is the fourth straight quarterly increase. The value of real estate holdings had registered positive growth in both 2020 and 2021.
“Directly and indirectly held corporate equities ($38.6 trillion) and household real estate ($41.2 trillion) were among the largest components of household net worth. Household debt (seasonally adjusted) was $18.6 trillion,” the report said.
Lower Savings
The fall in household net worth is happening as many Americans struggle to save enough money amid elevated inflation. Annual inflation has been above 7.5 percent every single month this year.Among households making below $50,000 per year, less than 40 percent had money at the end of the month after meeting expenses.
For those earning between $50,000 and $99,999, this number was at 60, down from almost 70 in July 2021. For households making over $100,000 annually, 80 percent had money after paying for expenses, down by 5 percent compared to a year back.
This is a “much better position” when compared to previous recessionary environments, which indicates that the consumer sector might be able to withstand economic challenges. ING is expecting a recession in 2023, but only a modest and short-lived one— provided the Fed eases its monetary policy swiftly.