“The net worth of U.S. households finished 2020 at the highest level on record,” WSJ writes.
Why It Matters: Stock prices surged, and real estate and other assets also saw strong gains, combining to erase, or temper, losses from the Covid-19 downturn.
Numbers To Consider:
- Household net worth, which is calculated as “the difference between assets and liabilities,” ended Q4 at $130.2 trillion. It was a 5.6% improvement from Q3 and 10% from the end of 2019.
- It looks like the gains came on the back of financial assets rising. The S&P 500 grew 12% in Q4 and 16% for 2020, with the help of government stimulus.
- With interest rates low, the real estate market is booming as well. The “existing-home price rose to about $310,000 in December, an increase of almost 13% from December 2019.”
The Crystal Ball: “Rising net worth is contributing to an increasingly optimistic outlook for the economy’s recovery prospects this year, as household spending accounts for more than two-thirds of U.S. gross domestic product.”
- “The nearly $1.9 trillion relief package that passed Congress on Wednesday is projected to help propel the economy to its fastest annual growth in nearly four decades. Analysts surveyed by WSJ in recent days lifted their average forecast for 2021 economic growth to 5.95% from 4.87% a month earlier.”
Some Closing Numbers:
- Total debt in housing, which is mainly mortgages, also went up by 4%. It’s now $16.64 trillion.
- Consumer credit didn’t change much, but outstanding business debt increased by 9.1% in 2020 to $17.7 trillion.
- The federal government saw its debt tick up 24% to nearly $24 trillion.
Here comes the spending! Now let’s watch what happens to inflation…