American Wealth Declined in Q3

Guest Post by Martin Armstrong

According to a recent Federal Reserve report, US household wealth experienced a significant decline in the third quarter, largely attributed to deep stock losses. The central bank’s report revealed that household net worth fell by approximately $1.3 trillion, or 0.9%, from July to September, amounting to $151 trillion. The decline was primarily driven by a $1.7 trillion drop in the value of equity holdings.

This comes after a volatile year for the stock market, with all three major indexes experiencing a significant downturn in mid-2023. While the market has since recovered, the report also indicated a continued rise in household debt, which increased at a 2.5% annual rate in the third quarter. The decline in household wealth has raised concerns about its potential impact on consumer spending, borrowing, and investing, as well as its implications for the broader economy.

Americans living off credit began pulling from their 401K accounts early during Q3. Hardship withdrawals rose 13% in the beginning of June after already being 27% higher than January. Hardship withdrawals allow employees to pull money out of their 401K for an “immediate and heavy financial need.” No one would recommend doing this unless the situation was dire as individuals must show evidence that the money will be used for a major hardship in order to avoid the 10% early withdrawal fee imposed for those under 59.5.

The year 2023 marked the first time personal credit debt surpassed $1 trillion. Credit card interest rates average 24.56%, according to LendingTree. Credit cards aside, American households are carrying $17.29 trillion in various forms of debt, with the average household hosting $103,358 in debt that continues to compound.

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