According to Federal Reserve figures released on Friday, a booming stock market helped push U.S. household wealth to a new high of more than $154 trillion in the second quarter.
According to the Federal Reserve, in its quarterly assessment of the balance sheets of families, corporations, and federal, state, and local governments, household net worth increased 3.7% to $154.28 trillion from $148.79 trillion at the end of the first quarter to $154.28 trillion in the period from April through June.
According to the data, people have fully recovered from the wealth losses brought on by the devastating stock market crash and the decline in real estate values that lasted for the majority of last year as the Fed launched an aggressive campaign to control inflation through sharply rising interest rates.
The Standard & Poor’s 500 Total Return Index returned 8.7% in the second quarter, its highest gain since the final three months of 2021, when dividends were reinvested. The equity market’s surge increased household net worth by $2.6 trillion, or over half of the total increase in wealth for the quarter.
Adding $2.5 trillion to the gain in net worth was real estate, which saw property values rise for the first time since the second quarter of 2022.
By about $1.8 trillion, or 1.2%, household wealth at the end of June eclipsed the previous record high of $152.49 trillion achieved in the first quarter of 2022.
The report revealed that household cash warchests, which are made up of various bank deposits and money market mutual fund holdings, continued to shrink, falling to $17.7 trillion for a record fifth consecutive quarter.
That stockpile, which was a significant factor in the consumer spending’s resiliency, was down by $66 billion from the end of March to the end of June and had decreased by more than $560 billion from its peak of almost $18.3 trillion at the end of the first quarter of 2022.
Banks, which have been sluggish to catch up with the Fed’s rate hikes by giving higher interest rates on checking and savings accounts and, until recently, certificates of deposit, have seen a continued shift in household saving habits. Money market fund balances increased by $137 billion to a record high of over $3.5 trillion, while bank deposits decreased by more than $200 billion to below $14.2 trillion.
In the second quarter, debt levels for individuals, companies, and governments all continued to rise, albeit the rates of increase varied greatly by sector.
The total amount of non-financial debt climbed at the quickest rate since the first quarter of 2021, at annualised 6.3%, to reach $71.2 trillion, with the government holding $31.3 trillion and families and businesses each owing about $20 trillion.
The federal government debt increased by 12.7% on an annualised basis, which was the greatest increase since the record spike in the second quarter of 2020 that had supported the initial wave of pandemic relief spending. After the Biden administration and Congress reached an agreement to suspend the federal debt ceiling and prevent a government default late in the second quarter, the U.S. Treasury increased bond issuance.
While this was happening, the rise of business debt significantly slowed, rising in the second quarter at just a 1.9% annualised rate, which is the weakest rate of growth since the final three months of 2020.
Stock market drives U.S. households to record wealth