The stock market in January took a dive in Americans’ wealth.
In the first quarter, the net worth of households and nonprofits fell by $0.5 trillion to $149.3 trillion, according to Federal Reserve Bank data released Thursday. That’s a notable turnaround from the robust gains in wealth that began in mid-2020, fueled by skyrocketing prices of homes and equities. The first-quarter decline reflects the swoon in the stock market earlier this year, which slashed $3 trillion from the value of directly and indirectly held corporate equities. Total assets held by households were valued at $46.3 trillion in the first quarter—one of their largest assets.
The Dow and the S&P 500 each dropped by more than 5 throughout the first three months of this year, while the Nasdaq plummeted by about 9 percent. It was the worst quarterly performance for the stock market since the first quarter of 2020, when the coronavirus pandemic disrupted the US economy.
This year, the U.S. stock market declined because of Russia’s invasion of Ukraine, rising oil prices, soaring inflation, interest rate hikes by the Federal Reserve and continued concern about the Covid-19 pandemic. But the drop in equities was partially offset by a $1.7 trillion increase in real estate values and a high rate of personal saving, the Fed said. Households and nonprofits held $44.1 trillion in real estate assets. The ratio of household net worth to disposable income remained near its record high and continues to be far above its pre-pandemic level in 2019.
In addition, the Federal Reserve reported that household debt grew at an annual rate of 8.3%, reflecting strong growth in both home mortgages and consumer credit. The continued rise in home prices prompted an 8.6% increase in mortgage debt, while Americans also borrowed more on their credit cards and took out more auto loans, leading consumer credit to jump 8.7%.