US Wealth Gap Widens as Top 1% Owns Nearly Half of Corporate Equities
The wealth gap in the USA continues to widen, with the top 1% now owning nearly half of all corporate equities and mutual fund shares. This is a significant increase from 42% in 1990. The wealth of the top 1% has reached a record $52 trillion in the second quarter, with their fortunes climbing by 8.5% over the past year, the highest increase among all wealth groups.
Mark Zandi, chief economist at Moody's, warns that an economy 'powered in big part by the spending of the extraordinarily well-to-do' could face a serious threat if their portfolios start performing poorly. This is due to the top 1% commanding nearly a third of the nation's total wealth and after-tax wages for higher earners growing at the fastest pace since late 2021, up 3.6%. However, the bottom 90% hold only 12.8% of those assets, with their portfolios relying more heavily on real estate. In contrast, after-tax wages for low-income households grew just 0.9% year over year in August, the slowest pace since 2016.
Despite the top 40% of earners driving more than 60% of total US spending, rising asset prices lifted annualized consumption growth by 0.3 percentage points in Q3, indicating a potential slowdown in consumer spending. A market pullback could quickly turn this spending boost into a slowdown, posing a threat to the economy.
The growing wealth disparity in the USA, with the top 1% seeing significant increases in their fortunes, could have serious implications for the economy if their spending slows down due to poor portfolio performance. However, the majority of Americans, the bottom 90%, hold a much smaller share of the nation's wealth and have seen slower wage growth, highlighting the need for policies that address income and wealth inequality.
