US household wealth declines for first time since 2020

US household wealth declines for first time since 2020

Highlights:

• US household wealth dropped in the first quarter of 2022, the first time since 2020.
• US household net worth fell to US$149.3 trillion from a historic US$149.8 trillion at the end of last year.
• Household balance sheets stayed healthy through the first three months of 2022.

US household wealth dropped in the first quarter of 2022, the first time since 2020, a Federal Reserve report showed on Thursday. The slump is triggered by a decline in the stock market, which overwhelmed continued gains in home values, the report said.

The Fed’s quarterly report of the national balance sheet revealed that US household net worth fell to US$149.3 trillion from a historic US$149.8 trillion at the end of 2021. The US$3-trillion drop in the value of corporate equities led to this decline. 

Such a dip was seen in the first quarter of 2020 for a brief period with the onset of the Covid-19 pandemic. It was a time when a deep recessionary situation rattled the global financial markets.

However, the report maintained that household balance sheets stayed healthy through the first three months of 2022. It remained US$32.5 trillion above the pre-pandemic levels.

It also reported that balances in bank accounts increased. The deposits and currency rose by about US$210 billion to US$4.47 trillion. Savings deposits grew from about US$90 billion to US$11.28 trillion, the report mentioned.

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Stocks continue to plummet amid rising inflation

The stock market has continued to decline in the second quarter over a worrisome sentiment due to the four-decade high inflation and the Federal Reserve’s tight policies to protect the economy from crumbling. This fall may have hit people’s wealth from the start of the second quarter.

Bottom line:

Meanwhile, retailers are slashing prices to clear their inventory, including Walmart (NYSE: WMT) and Target (NYSE: TGT). But prices of services like the hotel industry are scaling up to above pre-pandemic levels, keeping inflation hot.