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What's going on?

Surging stock prices and steadily rising property values propelled the total wealth of US households to a new record high in the third quarter, according to data released on Thursday. Dilly dilly!

What does this mean?

US stocks rose by about 4% in the third quarter, while home prices in Americas 20 biggest cities jumped over 6% from a year earlier. That powered an increase in peoples wealth of almost 2% versus the previous quarter: while no bitcoin streak, thats actually pretty big when compared to, say, the rate of price increases (a.k.a. inflation) in the economy, which is about 2% annually. Overall, Americans are getting richer though that is, of course, not the whole picture

Why should I care?

The bigger picture: Inequality tends to rise when the value of investments, such as stocks and houses, increases faster than wages.

Wealthier households tend to own more financial investments like stocks and are more likely to own their own home (often without much of a mortgage). So, as the value of those investments shoots higher, the wealth gap between the haves and the have-nots increases. This is particularly true when wage growth remains much lower, as it does currently (its about 3% per year) those accumulating savings through work are losing ground on those that already have established wealth.


For markets: As Americans get wealthier, they tend to spend more which is good for stocks.

People are more likely to do work on their home when property values are increasing (which is good for the likes of Home Depot, if bad for the sanity of long-suffering spouses). Equally, vacations tend to get a bit more extravagant and other discretionary purchases become easier for people to swallow. Since consumer spending accounts for over two thirds of the US economy, the wealth effect (i.e. people getting wealthier) tends to feed through to overall economic growth and many companies profits.

Originally posted as part of the Finimize daily email.

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