Stock Groups

Stocks are at a 70-year high as a share of household financial wealth

On August 16, 2021, tourists lined up to take photos at the Charging Bull Statue. It is located in New York’s financial district.

Tayfun Coskun | Anadolu Agency | Getty Images

The stock market’s gains have contributed to a greater share of the wealth in America than any other source.

Bank of America reports that equity now accounts for about half of the $109.2 Trillion in financial assets households had through the 2nd quarter of 2021. Financial assets include stocks and bonds as well as cash, bank deposits, certificates, and deposit certificates.

Bank of America stated that equity shares of assets are at their highest level in 70 years.

In the second quarter of 2018, the household’s net worth increased to $141.7 trillion. This was due to a $3.5 trillion rise in corporate equities, as stock prices continued to climb. The Federal Reserve estimates that the equity portion of net wealth includes non-profits at 41.5%.

The news is good for stockholders, however there are still concerns about the possibility of the market changing. Wall Street witnessed the end of the longest bull market ever recorded in 2020. Then, the stock market quickly recovered and regained its power through 2021.

Mitchell Goldberg of ClientFirst Strategy said, “Money moves where money grows.” They’re still investing money in stocks as the stock market continues to rise. They will continue to invest until they find a better spot to place it.

The S&P 500 has risen just over 15% for 2021, on the backs of friendly fiscal and monetary policyStrong growth of corporate earnings.

The Federal Reserve’s aggressive money-pumping and record low interest rates have been a significant factor in the current policy environment. Congress has also provided massive fiscal stimulus.

The Fed making the first noises about tighteningWashington and Washington politicians battling over more spendingGoldberg asks, “What will happen to market-friendly policies if they start turning around?”

He said that “people’s wealth is up on two things: stocks and homes, and both are more or less linked to interest rates.” There have been many policies that have increased the assets’ value. How do you know what to do if these policies are discontinued? This is the $64 trillion question.

Fed officials indicated that they are likely to begin reducing the pace of their monthly asset purchasesBy the end of this year. However, it seems that interest rate increases are still a long way off. Philadelphia Fed President Patrick Harker stated Friday that the central banks is not likely to begin hiking before late-2022 or even 2023.

Michael Hartnett, chief investment strategist at Bank of America, noted that Bank of America clients had “sold stocks (modestly),” over the past five weeks. Although the bank’s indicators of sentiment are almost as bullish as to cause a contrarian signal, they have become a little more cautious.

Yet, the investors continue to pour in. $34.5 billion into U.S. equity mutual funds and ETFsMorningstar says that this is the case for all stocks in the past twelve months. This indicates there’s still a lot of stock-buying appetite.

Goldberg indicated that he was cautious in this type of environment. He advised his elderly clients to cut their cash and begin building wealth in an uncertain environment.

He stated that everyone who invests today does so on the basis of falling interest rates and globalization. These are large macroeconomic cycles and we seem to be seeing the opposite now. It will bring about a lot volatility, much peril, as well as a lot more opportunity, while we’re going through these changes.”

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Mike Robinson
Mike covers the financial, utilities and biotechnology sectors for Street Register. He has been writing about investment and personal finance topics for almost 12 years. Mike has an MBA in Finance from Wake Forest University.