You may have seen the alarming news today that household net worth dropped $8.7 trillion in the second quarter, a "record" annualized rate of -20.9%.
That's all true, but you might be interested to know that this decline was almost entirely due to the stock market, with a little bit added from inflation. Here is household net worth with stocks excluded:
As you can see, household net worth tends to change very slowly if you exclude paper increases and decreases from stock holdings (both direct holdings and stocks held in mutual funds). Even when GDP took a sharp downward spike at the beginning of the pandemic, household net worth just chugged along.
I don't have any big point to make here except that you shouldn't get too alarmed about our record decline in household net worth. It's basically the same thing as saying that the stock market dropped a lot in Q2, which we already knew.
POSTSCRIPT: Don't forget that Tuesday is inflation day! The fate of the economy apparently hangs on whether it turns out to be 0.3% or 0.5%.
Net worth from bonds and CD's - long- and medium-term - also dropped, thanks to the Fed. If you bought a 10-year Treasury bond a couple of years ago you were not exactly speculating wildly, but if you have to sell you will still take a loss.
Nope, the Fed is irrelevant.
Correction back to the precovid trend.
Despite a welcome drop in gas prices, inflation remains very high (8.3% annually): core inflation also remains high at 6.3%. These figures, I believe, will result in another large Fed rate hike and possibly a further decline in the stock market.
https://finance.yahoo.com/news/august-inflation-data-cpi-september-13-211038620.html
The number was 0.1, not even as high as the 0.3 or 0.5 as Qevin Drum feared.
Looks like Dark Brandon has darkened the door of Team Permanent. & now Larry Summers is like the wary parent at the end of the Monkey's Paw.
Yes, inflation on a monthly basis has essentially gone to zero over the last two months. The media stories which are based on the year/year number are saying inflation is still high are highly misleading. In order to get the year/year number down very much the monthly change in the CPI would have had to be negative, that is prices would have had to decrease.
Without a drop in oil price total inflation is rarely negative, so prices are likely to stay at least at current levels, but they have not been increasing over the last two months.
Median?
Average?
Some numbers: https://www.businessinsider.com/personal-finance/average-american-net-worth
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