Tourists line up to take pictures at the Charging Bull Statue, New York’s financial district, on August 20, 2021.
Typhoon Kaskun | Anadolu Agency | Getty Images
The wealth of U.S. households as a whole has never been so great, largely thanks to gains in the stock market which is a bigger part of this prosperity than ever before.
Indeed, according to Bank of America, about half of the মালিক 109.2 trillion of family-owned financial assets in the second quarter of 2021 is equity holdings. In addition to stocks, financial assets include bonds, cash, certificates of deposit and bank deposits.
According to Bank of America, the equity share of the assets is the highest in 70 years.
Overall household total assets rose to 1 141.7 trillion in the second quarter, a ারের 3.5 trillion rise in the value of corporate equities, which continued to boost stocks during this period. According to the Federal Reserve, equity shares of total assets, including nonprofits, account for 41.5%.
While the news has been good for stock owners, there is a perpetual presence of risk-taking risks in the event of a change in market fortunes. The longest bull market in Wall Street history saw an end in early 2020, then quickly resumed, and will set a new record in late 2021.
“Money goes where it goes,” said Mitchell Goldberg, president of ClientFirst Strategy. “As the price of the stock continues to rise, they continue to keep money there. They will continue to keep money in it until a better place is found to keep it.”
The S&P 500 is up just 15% for 2021 on the back of friendly fiscal and monetary policy and strong growth in corporate income.
A significant part of the policy background is the aggressive money-pumping from the Federal Reserve with record-low interest rates and massive fiscal stimulus from Congress.
With the Fed raising the first voice about austerity and politicians in Washington fighting higher spending, Goldberg wonders what will happen if market-friendly policies begin to turn around.
“Human resources depend on two things, stocks and houses, and they are both tied to lower interest rates,” he said. “There are many policies that have increased the value of these assets. What will happen if the policies go away? That’s the $ 64 trillion question.”
Fed officials have indicated that they will likely begin to slow down their monthly asset purchases by the end of the year. Still, raising interest rates seems to be one way, Philadelphia Fed President Patrick Harker confirmed Friday that the central bank is unlikely to start hiking in late 2022 or early 2023.
Bank of America chief investment strategist Michael Hartnett noted Friday that clients have “sold stocks (modestly) in the last 5 weeks.” The bank’s attitude indicator has almost gone out of warmth which warns a reverse “sell” signal a bit more.
Nonetheless, investors have poured about .5 34.5 billion into U.S. equity mutual funds and ETFs over the past 12 months, indicating that there is still a lot of hunger for stocks, according to Morningstar.
Goldberg said he is wary of such environments, and advises his older clients to reduce their holdings a bit and raise money that could be a more challenging environment.
“Everyone who is investing today is investing in the same way, based on lower interest rates, globalization, supply-demand discipline and lower inflation,” he said. “These are huge macroeconomic cycles, and it looks like we’re seeing the opposite now. As we go through these changes, it’s going to create a lot of instability, a lot of danger and a lot of opportunities.”
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