Households’ stocks of financial assets are at their highest for 70 years

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Tourists line up to take a photo of the Charging Bull statue in New York’s financial district on August 16, 2021.

Tayfun Coskun | Anadolu Agency | Getty Images

The overall wealth of American households has never been higher, thanks to the rising stock market, which holds a larger share of prosperity than ever before.

In fact, according to Bank of America, equity holdings now represent about half of the $ 109.2 trillion in financial assets held by households in the second quarter of 2021. Non-equity financial assets also include bonds, cash. , certificates of deposit and bank deposits. .

According to Bank of America, asset shares are at their highest level in 70 years.

Overall household net worth jumped to $ 141.7 trillion in the second quarter. This is the result of a $ 3.5 trillion increase in a company’s stock value, as stocks continued to rise during the period. According to the Federal Reserve, including non-profit organizations, the share of equity in net assets is 41.5%.

While this has been good news for stock owners, there are still risk-taking issues that cause concern when market fortunes change. On Wall Street, the longest bull market in history ended in early 2020 and quickly reopened, breaking records until the second half of 2021.

Mitchell Goldberg, President of ClientFirst Strategy, said: “As stock prices continue to rise, they continue to invest money in them. They will keep putting money in it until there is a better place to put it.

The S&P 500 rose more than 15% in 2021. Favorable fiscal and monetary policy And strong growth in corporate profits.

A significant part of the political backdrop was record interest rates and aggressive Federal Reserve funding, in addition to large-scale fiscal stimulus from Congress.

With the Federal Reserve Make the first noise about the tightening And Washington politicians fight for more spending Goldberg wonders what happens when pro-market policies start to reverse.

“People’s wealth is rising by two, stocks and housing, both more or less tied to interest rates,” he said. “Many policies have increased the value of these assets. What if they were gone? It is a $ 64 trillion problem.

The Federal Reserve Board has shown that they are likely to do so. Start slowing your monthly asset purchases by the end of the year. Still, interest rate hikes seem far away, and Federated Bank of Philadelphia Governor Patrick Harker said on Friday that the central bank is unlikely to start rising until late 2022 or early 2022. 2023.

Michael Hartnett, chief investment strategist at Bank of America, said on Friday that clients “have sold shares (moderately) in the past five weeks.” Bank sentiment indicators have become a bit more cautious, moving from bullish enough to trigger a “sell” signal against the tide.

Yet investors are investing $ 34.5 billion in US equity trusts and ETFs According to Morningstar, the past 12 months alone show that the desire for stocks is still enough.

Goldberg said he was cautious in such an environment and advised older clients to reduce their holdings somewhat and build up cash in more difficult environments.

“Everyone invested today invests in the same way on the basis of falling interest rates, globalization, a broad supply-demand chain and low inflation,” he said. declared. “These are huge macroeconomic cycles and now appear to be in reverse. While knowing these changes, it will create a lot of volatility, a lot of danger and a lot of opportunity. . “

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