The net worth of American households and non-profit organizations surged in the second quarter to the highest level ever, thanks to the rebound in stocks and fiscal stimulus following a record drop in the previous quarter.
Household net worth increased by 6.8%, or $7.6 trillion, to a record $118.96 trillion, according to a Federal Reserve report. This was the largest quarterly gain since 1952. This is also about $380 billion more than the net worth at the end of 2019.
This increase came despite a record drop of $7 trillion in the previous three months, quarter first, caused by an economic shock from the COVID-19 pandemic.
During the same period, the level of federal government borrowing also soared as lawmakers responded with massive fiscal relief. Additionally, the value of equities increased $5.7 trillion from the prior quarter, while real estate advanced about $458 billion.
In the first quarter, the pandemic and the subsequent shutdowns sent the economy into a recession, which was the deepest since the 1940s. This resulted in a record decline in the household net worth in the first quarter of 2020.
Since then, the economy has been seeing a gradual recovery. Not to mention, the S&P 500’s quick recovery to pre-pandemic levels in mid-August and fresh highs this month. While the Dow Jones Industrial Average remained about 1.5% away from its February peak, Nasdaq jumped 23% higher than the previous ATH.
However, not every American benefited from this growth, as about 45% of the US population doesn’t own equities, according to a June 2020 survey from Gallup.
The housing sector also experienced a V-shaped recovery as pent-up demand and record-low mortgage rates boosted sales, but again, one-third of households don’t own a home.
Consumer credit excluding mortgage debt decreased $69 billion during the pandemic, for the first time in four years.
Low-interest rates that the Fed has announced to keep near-zero through 2023, meanwhile bolstered corporate borrowing during this period. While firms’ debt increased at an annualized rate of 14%, federal debt outstanding swelled at a rate of 58.9%.