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In mid-2020, the least wealthy gained the most net worth

The FRED Blog has discussed how the onset of the COVID-19 pandemic reduced the net worth of households. To recap: Your net worth is the difference between the value of your assets and the value of your liabilities. When the value of your assets decreases while the value of your liabilities stays constant, your net worth becomes smaller.

The ALFRED graph above shows that the largest reduction in household net worth during the first quarter of 2020 occurred for the wealthiest 1% of households. The high volatility of financial markets during that period and the differences in the distribution of total assets across different classes of households can help explain that.*

The same ALFRED graph also shows that, during the second quarter of 2020, household net worth increased all around, this time with the largest gains among the bottom 50% of households.

Given the large reduction in economic activity recorded during that time, this rebound is remarkable. Faster growth in home prices and the large accumulation of real estate assets among the least wealthy can help explain this gain in net worth. Also, much of the gains in asset values comes from expectations of higher future incomes, which may not correlate with current income nowadays.

*This post shows an ALFRED graph to display the data available at the time of writing. For the latest data, see this graph.

How this graph was created: From FRED’s main page, browse data by “Release.” Search for “Distributional Financial Accounts” and click on “Levels of Wealth by Wealth Percentile Groups.” From the table, select the “Total Net Worth” series held by each of the four wealth quantiles and click “Add to Graph.” Use “Edit Line 1” to change the graph units by selecting “Units: Percent change” and clicking “Copy to All.” Last, edit the graph “Format” by selecting “Graph type: Bars” and choosing colors to taste.

Suggested by Diego Mendez-Carbajo.

View on FRED, series used in this post: WFRBLB50107, WFRBLN09053, WFRBLN40080, WFRBLT01026

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