Economic News

American Net Worth See Record Increase in Q2 2020

Amid all of the uncertainty and lockdowns that the past few months have brought, it seems that the overall value of Americans’ portfolios and homes has soared. As Axios reports, new data from the Federal Reserve shows that U.S. household net worth reached $119 trillion during the second quarter of this year. That marked an increase of $7.6 trillion, which amounts to a 6.8% rise. What’s more, the spike was the largest on record since 1952 when the Fed started noting these numbers.

The jump in net worth can mostly be attributed to the surprisingly strong stock market that’s only recently begun to falter. As a result, not only have the wealthy seen their investments increase but so have workers with 401(k)s that count on the markets. For the quarter, equity values reached $5.7 trillion to make up three-quarters of net worth gains.

Of course, this also marked a massive rebound from the first quarter of the year that saw equities lose $8.3 trillion in value as markets plunged due to economic fears spurred by the coronavirus. Elsewhere, the increased value of real estate continued to bolster net worth’s, gaining a total of $457 billion last quarter and $422 billion in Q1. All other assets increased by more than $1.36 trillion during the quarter.

A major factor behind the market’s run that, in turn, helped prop up net worth was the stimulus efforts of the CARES Act, which was signed into law just before the second quarter began. CARES also famously approved the $1,200 direct payments to Americans making under $75,000 per year (with payment figures tapering off for those making more than that). These payments not only likely helped boost Q2’s figures higher but have carried over into this quarter as well. Speaking the Wall Street Journal, Barclays economist Blerina Uruçi explains, “The fiscal stimulus that we’ve received so far has been really important in shoring up household balance sheets, and it was instrumental to the recovery in consumer spending that we’ve seen in the third quarter.”

These figures from the Fed once again highlight a dichotomy currently taking place in our country. While few would likely describe the past few months as prosperous, net worth’s and savings rates have managed to climb. That can certainly be confusing as there are many Americans still struggling — especially as unemployment benefits wain and no further stimulus packages seem to be in consideration. However, this reality could be catching up with the markets as indices have taken a pounding this week. Because of this, we’ll have to see how many of these record gains are reversed by the time the third quarter comes to a close.

Also published on Medium.

Other Articles by Jonathan Dyer