Wealth of Top 1% Reaches Record $44.6 Trillion as Stock Rally Lifts Portfolios: Fed

The Soaring Wealth of the Top 1%

New data from the Federal Reserve has revealed that the wealth of the top 1% reached a historic high of $44.6 trillion by the end of the fourth quarter. This represents a substantial increase driven by a year-end stock rally, resulting in a $2 trillion surge in their total net worth.

Stock Holdings Surge

The surge in wealth was primarily attributed to gains from stock holdings. The value of corporate equities and mutual fund shares held by the top 1% rose to $19.7 trillion, up from $17.65 trillion in the previous quarter. However, the value of their privately held businesses experienced a decline, offsetting gains from other sources.

Unprecedented Wealth Boom

This latest surge adds to an unparalleled wealth boom that commenced in 2020 amidst the Covid-19 pandemic market surge. Since 2020, the wealth of the top 1% has increased by nearly $15 trillion, representing a remarkable 49% rise.

Impact on Consumer Spending

Economists have noted that the rising stock market has contributed to a "wealth effect," which is bolstering consumer spending. The surge in stock prices has instilled greater confidence among consumers and investors, leading to increased spending and risk-taking.

Stock Market Ownership Disparities

The latest report underscores the significant disparities in stock ownership across the U.S. The top 10% of Americans possess 87% of individually held stocks and mutual funds, while the top 1% alone own half of all individually held stocks.

Impact of Stock Market on Wealth Distribution

Economists emphasize that a booming stock market disproportionately benefits the wealthy, particularly in driving higher consumer spending. Middle-class and lower-income Americans rely more on wages and home values rather than stocks for their wealth accumulation.

Forecasts and Inequality Trends

Given the S&P 500's 10% increase this year, it is anticipated that the wealth of the top echelon has already surpassed the previous record by the end of 2023. Although inequality slightly decreased in 2021 and 2022 due to rising wages and housing prices, it has since reverted to pre-pandemic levels.

Conclusion

At the close of the fourth quarter, the top 1% accounted for 30% of the nation's wealth, while the top 10% held 67% of the total wealth. This underscores the ongoing wealth disparities across the country.