In Q1 2023, a notable rebound in US household wealth was reported, marking the highest value in the last year. The resurgence was majorly driven by the stock market bouncing back from the previous year’s bearish trend, coupled with a significant interest in high-yield US government bonds, according to recent Federal Reserve data.
Household net worth leaped over US$3 trillion to reach nearly US$149 trillion, with an increase of around US$2.4 trillion in equities holdings. This surge outweighed a decrease of US$600 billion in real estate values. One noteworthy highlight was the record surge in households’ debt securities holdings, with a US$550 billion hike in Treasuries playing a vital role.
Despite the rise, the wealth level is still short by almost US$4 trillion compared to the record US$152.6 trillion achieved in Q1 2022. The quarterly financial health report of the nation demonstrated a decline in immediate cash availability, a factor that had significantly contributed to US household resilience during the COVID-19 pandemic. The combination of household bank deposits and money market mutual fund holdings dropped by approximately US$115 billion, reaching a low since Q3 2021.
The drop also reflected a transition from bank deposits to money market accounts, which offered higher interest rates post a year of Fed’s aggressive rate hikes. Savings and time deposits, the largest component, slid by US$420 billion to under US$10 trillion, the first time since early 2020.
Overall, the scenario demonstrates the changing financial strategies of households in response to fluctuations in the economic environment, with the stock market’s recovery acting as a primary driver for the improvement in household wealth.
This news is based on a report from the Malaymail website.