The week’s insight takes a step back. We’re going to look at how much wealth has been generated in the last few years care of new data released by the Federal Reserve.
Are there problems out there? Absolutely. Inflation remains high, though nearly all metrics suggest it has cooled off significantly recently. Geopolitical tensions have driven oil prices to around $90 per barrel, although you can still fill up your gas tank for under three bucks per gallon in our area. Americans are relying more on credit cards than they did during the stimulus-ridden era of 2020 through 2022, even though wages, after inflation, are on the rise. Overall sentiment about the economy is far from sanguine.
But there are many optimistic data points that the media sometimes glosses over. Just last week, the Fed issued its Survey of Consumer Finances for 2022. The report is compiled every three years, and reviewing its key findings helps to put aside near-term economic noise. What we found particularly interesting were the net worth figures.
Total wealth for American households rose a whopping 37%, after inflation, from 2019 through last year. That is the highest growth rate on record since 1989. Rallies in the stock market easily offset losses in the bond market over that span, while the US housing market skyrocketed – particularly in Florida and the Southeast. Government handouts also contributed to the net-worth jump, and now Congress is challenged with putting the debt genie back in the bottle. (That’s an insight for another week!)
According to the survey, median household wealth stood at $192,900 as of the end of 2022 with broad-based gains across income groups compared to 2019 levels – the “under age 35” cohort actually experienced the largest percentage net-worth climb. So, while inflation and much higher interest rates today are challenges for families and business owners, most of us are better off financially today.
It’s also important to think about what your new money priorities are given such rapid shifts in the economy writ large and perhaps your situation. Be sure to check out our “Year-End Financial Planning Checklist” blog from earlier this month for a run down on areas to optimize before 2024 begins.