Surging Stock Market Boosts U.S. Household Wealth to Record High

Introduction

U.S. household wealth reached a new record high of over $154 trillion in the second quarter, driven by a surging stock market and rebounding property values, according to data released by the Federal Reserve. This marks a 3.7% increase from the first quarter of the year.

Stock Market and Real Estate

• The Standard & Poor’s 500 total return index delivered an 8.7% return in the second quarter, contributing $2.6 trillion to household net worth.
• Real estate values also rose for the first time since the second quarter of 2022, adding $2.5 trillion to the increase in net worth.

Household Cash

Despite the surge in wealth, the data showed that households’ cash reserves continued to decline. The size of households’ cash warchests, including bank deposits and money market mutual fund holdings, dropped for a record fifth straight quarter to $17.7 trillion. This represents a decline of $66 billion from the previous quarter and over $560 billion from its peak in the first quarter of 2022.

Shifting Savings Habits

Household savings habits have shifted away from banks, which have been slow to offer higher interest rates. Bank deposits fell by over $200 billion to below $14.2 trillion, while money market fund balances reached a record high of over $3.5 trillion, an increase of $137 billion.

Debt Levels

Debt levels for households, businesses, and governments continued to rise in the second quarter. Total nonfinancial debt increased at an annualized rate of 6.3% to $71.2 trillion. The federal government debt saw the largest increase at 12.7%, while business debt growth slowed to 1.9%.

Conclusion

The surging stock market and rebounding real estate values have propelled U.S. household wealth to a new record high. However, households’ cash reserves have been declining, and debt levels for various sectors have continued to rise.

Reporting by Dan Burns Editing by Chizu Nomiyama and Frances Kerry

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