America’s Richest 1% Lose $1.5 Trillion on Stocks Ahead of Bear Market
Even before U.S. stocks plunged into a full-fledged bear market this week, the nation’s top 1% was posting huge losses.
The group’s overall wealth plunged $701 billion last quarter, the first drop since the start of 2020, led by $1.5 trillion in stock losses that were offset by gains in real estate and other assets, according to new estimates from the Federal Reserve. It’s the abrupt end to the extraordinary two-year run that added more than $11 trillion to their collective net worth.
These numbers, while significant at first glance, underscore the amount of wealth extinguished in recent weeks among the top 1%, who own more than half of the stocks held by Americans. The S&P 500 index is down another 19% since March 31, while the tech-heavy Nasdaq 100 plunged another 24%. Both benchmarks recorded more modest declines of 5% and 9% in the first quarter, respectively.
“People are scared,” said Nicole Gopoian Wirick, financial planner and president of Prosperity Wealth Strategies. “No one wants to see their investment portfolio shrink by 20% or more. With wealthier customers, sometimes that drop is even deeper because it’s a big number.
Stock market losses have eaten away at the share of wealth controlled by the richest 1% of Americans, with that figure slipping to 31.8% at the end of the first quarter from a record 32.2% at the start of the year, according to Fed data. . Yet their collective net worth remained at nearly $45 trillion, more than the $43.5 trillion held by the bottom 90%. Apart from last year, the top 1% own a larger proportion of American wealth than at any time in central bank estimates dating back to 1989.
Those outside of America’s richest decile hold less than 12% of the stock, which has shielded them from volatility in the first three months of the year. However, the housing market, a key driver of pandemic-era wealth gains for the wealthy and middle class, has also cooled recently, with mortgage rates hitting their highest level since 2008 as the Fed tightens its monetary policy to deal with the highest inflation. in 40 years.
The wealthiest individuals, who have profited the most from the stock market’s run to 2021, offer a clue to the extent of the losses for the wealthy who hold large stock positions. Americans in the Bloomberg Billionaires Index have lost about $760 billion this year, including $690 billion since the end of the first quarter. The world’s richest person, Elon Musk, has seen his personal fortune plummet by $64.5 billion since the end of 2021, bringing his net worth to around $206 billion.
On the other hand, the poorest half of Americans increased their wealth again last quarter, continuing a trend that began when Covid-19 was first detected in the United States in early 2020 and that the federal government provided billions of dollars in relief and fueled hot work. market. The group’s net worth increased by $164 billion in the first three months of the year, to $3.9 trillion.
Other middle-class Americans, from the 50th to 90th percentile, also increased their net worth. The rest of the top 10% – also heavily exposed to the stock market – lost ground.
Over the past five years, the wealthy have enjoyed a breathtaking rise in the value of stocks and other assets. Even before the S&P 500 delivered total returns of 18% in 2020 and 29% in 2021, the index had returned 22% in 2017 and, after a single-digit decline in 2018, 31.5% in 2019.