U.S. household wealth grew by $20 trillion since the fourth quarter of 2019, according to an analysis by ING's chief international economist, James Knightley. From the equity market trough in March last year, wealth has increased $26 trillion thanks to massive support from both the federal government and the Federal Reserve.
Despite the lockdowns brought on by the pandemic, the U.S. household balance sheet improved dramatically to $154.2 trillion in the first quarter of 2021, Knightley wrote, citing Federal Reserve Flow of Funds data.
Total assets at the end of 2019 stood at $134.3 trillion, then plummeted to $127.8 trillion at the end of March 2020 when financial markets crashed, but rebounded on the back of stimulus packages and relief payments.
Non-financial assets, mainly real estate, now total $44.6 trillion, while financial assets total $109.6 trillion. Here are the largest categories:
- Pension entitlements: $29.9 trillion.
- Corporate equities: $28.2 trillion.
- Small-business equity: $13.1 trillion.
- Mutual funds: $11.6 trillion.
- Time and savings deposits: $11.2 trillion.
Liabilities are "just" $17.2 trillion, Knightley wrote, and are primarily mortgage and consumer loans, which leaves household net worth at $136.9 trillion. This is equivalent to 620% of U.S. GDP.
The Rich Get Richer
Knightley's analysis found that the biggest contribution to financial wealth gains came from corporate equities and mutual funds, mainly owing to resurging risk appetite and equity markets rising on unprecedented Federal Reserve and government stimulus.
These things also account for strong performances for pension and life insurance funds, he said. Conversely, the value of debt security holdings has actually fallen.
Higher-income and already wealthy households will be the main beneficiaries of the increases in wealth since they will have been heavily invested in these asset classes already, according to Knightley.
Moreover, higher-income and wealthier households spend proportionately more on services and "experiences" — travel, eating out, theater, cinema — which pandemic containment measures curtailed.
All this likely led to a significant increase in unplanned saving among wealthy households, with the money instead put into financial and physical assets.
