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Stock-market gains give rise to another gain in household wealth – MarketWatch

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A video board displays the day's closing numbers on the floor.

The numbers: Mostly due to a rising stock market, the net worth of households rose in the third quarter.

The net worth of households and nonprofits improved to a record high in the third quarter of $109.04 trillion from $106.97 trillion, a gain of 1.9%, the Federal Reserve said Thursday.

Meanwhile, total domestic nonfinancial debt grew at a seasonally adjusted annual rate of 4.4%, the slowest rate of the year, as businesses slowed down their pace of borrowing, the Fed said in its financial accounts of the U.S. report.

What happened: The buildup of financial wealth was concentrated in the stock market, which the Fed said rose by $1.2 trillion during the quarter. The value of real estate also rose, rising by $245 billion, and owners equity of the real estate they own rose to 59.9%, the strongest reading in 16 years.

Household debt rose at a 3.4% clip, with mortgage debt rising 3.1% while consumer credit rose 5.4%.

The growth in business debt outside the financial sector meanwhile slowed to 3.9% in the third quarter from 6.9% in the April-to-June period. Regulators appear increasingly concerned about the borrowing of businesses, particularly in the so-called leveraged loan segment.

The rise in the stock market

SPX, -0.15%

 gave way to rising valuations, with equities to net worth (or Tobin’s Q) reaching 123.81%, the highest in 18 years.

If the turmoil in financial markets continues, however, those lofty valuations will recede.

Companies had $4.39 trillion in cash on their balance sheet, up from $4.26 trillion.

Showing their sensitivity to interest rates, the ratio of short-term debt to their total was 30.58%, down just a touch from 30.63% in the second quarter but near nine-year highs.

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