The wealthiest country in the world is waking up to a reality that is not familiar and not very pleasant. It is getting poorer.
Americans losing their net worth
The collective net worth of the Americans had been soaring at a striking rate for the last two years, even as the businesses and families were content with the wrath of Covid-19. The households had piled up an additional $38.5 trillion from the beginning of 2020 till the end of last year, bringing the collective net worth to a record $142 trillion, as per the estimates of the Federal Reserve.
Just as the United States is learning to continue living with the coronavirus and spending the shifts back to the pre-pandemic average level, it faces a new threat that is rather scary. It is a dive in the wealth since the beginning of 2022 that JP Morgan Chase & Co anticipates totals approximately $5 trillion and could as well reach $9 trillion by the end of the year.
The wealthiest Americans have suffered the brunt, with the billionaires in the US fortunes diving by approximately $800 billion since the peak amidst the sharp losses that have taken place in the crypto, stocks, and financial assets. However, soaring interest rates are rattling the housing market where the working middle-class families have the bulk of their wealth.
It adds to the abrupt removal of a significant prop to confidence, which is the ever-largest nest egg. And this is by design. To stride over the highest inflation in several years, the Fed requires Americans to curtail their spending; even if that means that an economic slowdown is needed to get there.
As per John Norris, the chief economist working at Oakworth Capital Bank, it is painful to go back to the regular following staying in a fantasy world for the past year. He also said that it is going to be worse than it is.
Bloomberg News reports that since the beginning of this year, the S&P 500 Index has been down by 18%, the NASDAQ 100 was found to lose 27%, and the Bloomberg Index of cryptocurrencies has nosedived by 48%.
This all amounts to a “wealth shock” that is expected to drag on growth in the next year, revealed economist at JPMorgan led by Michael Feroli, when he mentioned in a note on Friday.
Fed Chair Jerome Powell, along with his colleagues, has said that they are looking forward to and aiming for such a slowdown, leaving it unlikely that the policymakers will decide upon any move to address the so-called Great Wealth Drop 2022.
In 2020 and 2021, billionaires were the biggest winners, and at present, they are losing to almost everyone else. The Bloomberg Billionaires Index, a daily measure of the wealth of the 500 wealthiest people globally, has plunged $1.6 trillion since it last peaked in November.
The Americans on the index have lost $797 billion since the peak. Elon Musk lost 41% of his wealth since November when his wealth surpassed $340 billion for a brief period, and he lost $139.1 billion. Following on close was Jeff Bezos, who lost 39% of his peak wealth, following on close. More and more people are worried about the widening disparities in the United States.
