US Households’ “Net Worth” Rose

US Households’ “Net Worth” Rose

over 3 years ago2 mins

US households’ “net worth” rose to its highest level ever last quarter, but that wasn’t necessarily good news for all Americans 🇺🇸

What does this mean?

A household’s net worth is calculated by subtracting its “liabilities” – like a mortgage and credit card debt – from its assets, including cash in the bank, real estate, and stock market investments. And it’s the last of those that’s made headlines: the value of household-owned stocks fell by around 25% between the end of 2019 and the end of 2020’s first quarter, only for those losses to reverse in the second 📊 Trouble is, 45% of Americans aren’t even invested in the stock market – and data shows they’re also likely to be some of the country’s poorest and hardest-hit by the pandemic.

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Why should I care?

80% of the lowest-earning Americans don’t own any stocks, so their households won’t have enjoyed last quarter’s windfall. Quite the opposite, in fact: since they’re more likely to be working in industries like hospitality and retail, they could well be among the US’s 22 million COVID-driven job losses 🦠 At the other end of the scale, remote workers with their nine-to-fives still intact haven’t had their finances hit so hard. That alone might widen the gap – in understanding, if nothing else – between society’s richest and poorest.

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Even if they’re only looking out for number one, the wealthy should be worried. Unemployed people who cut out all-but-essential purchases could have a massive knock-on effect on already-slowing consumer spending, which accounts for 70% of the US economy’s growth 💰 That could flatten a much-hoped-for recovery, as well as hit the profits of discretionary companies – sellers of products you want but don’t need. If that lowers those firms’ share prices, you can bet stock-owning Americans will feel it too.

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