In Reply to: Hey, Wednesday! What's happening? * posted by mh on September 16, 2026 at 09:27:11
If you buy a stock for $10,000 and the price of the stock doubles, how much have you made?
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Nothing. You haven't made any money until you sell the stocks.
Why is this relevant? Because the economy is being propped up by people who feel wealthy, but may not be as well off as they they think.
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.S. household wealth rose at a record pace in the second quarter, thanks to an unprecedented rise in the value of equity holdings. This is good news for the economy, as it keeps the "wealth effect" burning bright, but it also means growth is increasingly vulnerable to a downturn on Wall Street.
Federal Reserve figures last week showed that household net worth leaped $12.8 trillion in the April-June period, up 7% from the previous quarter, thanks to a $10.7 trillion jump in the value of equity holdings. Total net worth reached $196 trillion, which is a record 828% of disposable personal income (DPI).
In other words, Americans have never been richer, and it's largely down to the soaraway stock market.
Equities now account for 46.6% of U.S. households' financial assets and 34% of total assets, both record shares.
The problem, of course, is the distribution of that wealth.
More than half is in the hands of the wealthiest 1% of households, and more than 87% of all equity holdings are owned by the richest 10% of households. Would their spending patterns be significantly altered by a 10% correction on Wall Street? Not at the very top, though perhaps a bit at the lower end of that cohort.
But a bear market — a decline of 20% or more from the peak — could be a different proposition, especially if it’s a sudden slide. Even the richest households' propensity to spend would be affected.
Mark Zandi, chief economist at Moody's Analytics, estimates that the top 20% of income earners account for nearly 60% of all consumer spending. Other economists say that footprint is smaller, but either way, given that consumer spending accounts for around 70% of U.S. gross domestic product (GDP), a slump on Wall Street would be felt broadly.