Fed Engineered Market Correction Stripped Nearly $4-T from American’s Household Wealth

Fed Engineered Market Correction Stripped Nearly $4-T from American’s Household Wealth

$DIA, $SPY, $QQQ, $RUTX, $VXX

FLASH: This Bull Market is about to have its 10th Birthday!

US household wealth fell 3.5% into the close of Y 2018 on the back of a Fed engineered stock market correction in Q-4 that threatened to weaken a near 10 year recovery.

In its Quarterly Flow of Funds report, the Fed said household net worth for households and non-profit groups fell by $3.73-T, or 3.5%, to a 1-year low of $104.3-T.

Americans’ net worth fell at the highest mark since the Y 2007-2008 financial crisis, when Q-4 of Y 2008 saw a $3.8% or 6% dive.

The volatility that come on towards the end of Y 2018 figured prominently in the Fed’s ‘patience’ decision to put further rate hikes on hold as the FOMC assessed whether the drop in wealth would translate into less spending and slower economic growth.

Meanwwhile, consumer debt rose at the slowest pace in more than a year amid weakness in housing.

Household debt rose at a 2.9% annual rate after 3.6% in the prior frame, reflecting a slowdown in mortgages as home sales slowed, and growth in business debt cooled a bit to 3.8%.

Key Insights from the Fed’s report, as follows:

  • While the Q-4 dive in US stocks wiped out $5.41-T in market value, equities have rallied since 26 December, which will support a rebound in wealth.
  • The value of equities directly and indirectly held by households and nonprofit groups fell $4.57-T during the Quarter.
  • Excluding mortgages, consumer debt rose at a 6.2% pace, faster than the prior Quarter, as Americans continued to take advantage of relatively low interest rates and borrow for large purchases such as cars to fuel overall gains in spending.
  • Total consumer debt rose to a record $15.6-B as non-mortgage credit topped $4-T for the 1st time.
  • Companies had $4.05-T in liquid assets, which include cash, deposits, debt securities and stocks. That is the lowest mark in more than a year.
  • Owners’ equity as a share of real-estate holdings edged up to 60.1% from 59.8%.
  • This is the 1st time the ratio has exceeded 60% since mid-2002, based on previously released data.
  • Home equity loans fell to $533.1-B, extending a decade of declines.

President Trump’s policies are working.

Making and Keeping America Great!

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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