Stock market losses wipe out $9 trillion from Americans' wealth (2024)

Falling stock markets have wiped out more than $9 trillion in wealth from U.S. households, putting more pressure on family balance sheets and spending.

Americans' holdings of corporate equities and mutual fund shares fell to $33 trillion at the end of the second quarter, down from $42 trillion at the start of the year, according to data from the Federal Reserve. With major market indexes falling even further since early July, and the bond market adding further losses, market experts say the current wealth losses from financial markets could total $9.5 trillion to $10 trillion.

Economists say the drops could soon start rippling through the economy, adding pressure to Americans' balance sheets and possibly hurting spending, borrowing and investing. Mark Zandi, chief economist of Moody's Analytics, said the losses could reduce real GDP growth by nearly 0.2 percentage points over the coming year.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, September 26, 2022.

Brendan McDermid | Reuters

"The loss of stock wealth suffered to date, if sustained, will be a small, but meaningful headwind to consumer spending and economic growth in coming months," Zandi said.

The wealthy are bearing the largest losses, since they own an outsize share of stocks. The top 10% of Americans have lost over $8 trillion in stock market wealth this year, which marks a 22% decline in their stock wealth, according to the Federal Reserve. The top 1% has lost over $5 trillion in stock market wealth. The bottom 50% have lost about $70 billion in stock wealth.

The losses mark a massive and sudden reversal for shareholders who saw record wealth creation from soaring stocks since the pandemic. From the market lows of 2020 to the peak at the end of 2021, America's stock wealth nearly doubled, from $22 trillion to $42 trillion. The bulk of that wealth went to those at the top, since the wealthiest 10% of Americans own 89% of individually held stocks, according to the Federal Reserve.

With stocks declining, and with those at the top bearing most of the losses, wealth inequality has fallen slightly this year. The top 1% owned 31% of the nation's household wealth at the end of the second quarter, down from 32.3% in the beginning of the year. The share of wealth held by the top 10% slipped from 69% to 68%.

While Americans have gained wealth from rising housing prices, the gains have been more than offset by stock market losses. America's housing wealth rose by $3 trillion in the first half of the year to $41 trillion. The gain is only about a third of the amount lost in the stock market. Yet with rising mortgage rates, home prices have started to decline or cool in many markets.

The drop in stock wealth also far exceeds the $6 trillion in quarterly stock losses during the beginning of the pandemic in 2020. While stock markets have seen larger drops on a percentage basis, this year's stock losses are among the largest ever on a dollar basis.

The big question is how much the stock declines will impact consumer spending. So far, there are few signs that affluent consumers have cut their spending. Yet some say the "negative wealth effect " — the theory that wealth declines lead to spending declines — could soon start to bite, especially if market declines continue.

Zandi said lost stock wealth in the U.S. could reduce consumer spending by $54 billion in the coming year. Yet he added that the "stock-wealth effect" is smaller that in the past, since the wealthy own such a large share of stocks and have "have substantial excess saving built up during the pandemic."

"Since their saving cushion is so large, they won't feel as compelled to save more given the decline in their stock wealth," he said.

Stock market losses wipe out $9 trillion from Americans' wealth (2024)

FAQs

How much wealth vanished when the stock market crashed? ›

On Black Tuesday, October 29, stock holders traded over sixteen million shares and lost over $14 billion in wealth in a single day. To put this in context, a trading day of three million shares was considered a busy day on the stock market. People unloaded their stock as quickly as they could, never minding the loss.

Who gets all the money when the stock market crashes? ›

A decrease in implicit value, for instance, leaves the owners of the stock with a loss in value because their asset is now worth less than its original price. Again, no one else necessarily receives the money; it simply vanishes due to investors' perceptions.

Do you lose all your money if the stock market crashes? ›

No, a stock market crash only indicates a fall in prices where a majority of investors face losses but do not completely lose all the money. The money is lost only when the positions are sold during or after the crash.

Why do 90% of people lose money in the stock market? ›

Staggering data reveals 90% of retail investors underperform the broader market. Lack of patience and undisciplined trading behaviors cause most losses. Insufficient market knowledge and overconfidence lead to costly mistakes. Tips from famous investors on how to achieve long-term success.

Where does the money go when a stock collapses? ›

In reality, however, no money is actually "removed" from the market. Stock prices are determined by the buyers and sellers in the stock market, so when the market crashes the values of the stocks fall, but they just become less valuable.

What happened to all the money when the stock market crashed? ›

Simply put, the stock market crash of 1929 caused the Great Depression because everyone lost money. Investors and businesses both put significant amounts of money into the market, and when it crashed, tremendous amounts of money were lost. Businesses closed and people lost their savings.

Who got rich during the Great Recession? ›

When the market rebounded, Getty was a rich man, thanks to his action when the economy appeared to be at its worst. The same thing happened to people like Warren Buffett, Jamie Dimon, and Carl Icahn during the Great Recession of 2008. Each zigged when the rest of the world zagged.

Should people pull their money out of the stock market? ›

It can be nerve-wracking to watch your portfolio consistently drop during bear market periods. After all, nobody likes losing money; that goes against the whole purpose of investing. However, pulling your money out of the stock market during down periods can often do more harm than good in the long term.

Why am I losing so much money in the stock market? ›

Ultimately, many people lose money in the stock market because they simply can't wait long enough for meaningful profits to arrive. History shows that the longer you remain invested (in diversified stocks) the less chance you have of losing money in the stock market.

Are CDs safe if the market crashes? ›

Are CDs safe if the market crashes? Putting your money in a CD doesn't involve putting your money in the stock market. Instead, it's in a financial institution, like a bank or credit union. So, in the event of a market crash, your CD account will not be impacted or lose value.

What is the biggest loss of a person in stock market? ›

List of trading losses
Nominal amount lostUSD FX rate at time of lossPerson(s) associated with incident
GBP 827 mn0.633Nick Leeson
RUB 78.5 bn38.98Maksim Grishanin, VP Finance
USD 1.8 bn1Boaz Weinstein
USD 1.6 bnCarl Icahn
50 more rows

How much have most people lost in the stock market? ›

The top 10% of Americans have lost over $8 trillion in stock market wealth this year, which marks a 22% decline in their stock wealth, according to the Federal Reserve. The top 1% has lost over $5 trillion in stock market wealth. The bottom 50% have lost about $70 billion in stock wealth.

Do you get a tax break if you lose money on stocks? ›

Your claimed capital losses will come off your taxable income, reducing your tax bill. Your maximum net capital loss in any tax year is $3,000. The IRS limits your net loss to $3,000 (for individuals and married filing jointly) or $1,500 (for married filing separately).

How much wealth has been lost in the stock market? ›

The top 1% has lost over $5 trillion in stock market wealth. The bottom 50% have lost about $70 billion in stock wealth. The losses mark a massive and sudden reversal for shareholders who saw record wealth creation from soaring stocks since the pandemic.

How much money was lost in the stock market crash of 2008? ›

In the United States, the stock market plummeted, wiping out nearly $8 trillion in value between late 2007 and 2009. Unemployment climbed, peaking at 10 percent in October 2009. Americans lost $9.8 trillion in wealth as their home values plummeted and their retirement accounts vaporized.

How much money was lost in 3 days after the stock market crash? ›

Why Was It Important? The worst stock market crash in American history took place over three days in October 1929. These days later became known as “Black Thursday,” “Black Monday,” and “Black Tuesday” and accounted for more than a 30% drop in the Dow Jones Industrial Average, worth $34 billion.

How much money was lost in the stock market crash of 2000? ›

By the end of the stock market downturn of 2002, stocks had lost $5 trillion in market capitalization since the peak. At its trough on October 9, 2002, the NASDAQ-100 had dropped to 1,114, down 78% from its peak.

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