Global| Jul 19 2004Stock Market Rise Rebuilt Wealth
by:Tom Moeller
|in:Economy in Brief
Summary
Through the end of last week the S&P 500 Index of stock prices muddled along up just 1.4% from yearend levels. Recent weakness, however, follows strong gains through most of 2003. Year to year stock prices are up 11.6%. Gains in stock [...]
Through the end of last week the S&P 500 Index of stock prices muddled along up just 1.4% from yearend levels. Recent weakness, however, follows strong gains through most of 2003. Year to year stock prices are up 11.6%.
Gains in stock prices raised the value of the household sector's financial assets. Through 1Q04 the market value of corporate equities held by the household sector rose 27.9% versus 1Q03. Despite the rise in interest rates that would have eroded the value of fixed income assets, the value of all mutual fund shares held by the household sector rose 39.0%.
The rise in the value of these financial assets greatly improved the net worth of the household sector to $45.2 trillion versus $39.6 trillion in 1Q03. A 10.1% rise in the value of real estate holdings aided the improvement. (Financial assets are more than twice the value of real estate assets for the household sector.)
Liabilities owed by the sector were up 10.9% y/y in 1Q due mostly to a 12.5% rise in home mortgage obligations.
"Why Do Stock Prices React to the Fed?" from the Federal Reserve Bank of St. Louis is available here.
Tom Moeller
AuthorMore in Author Profile »Prior to joining Haver Analytics in 2000, Mr. Moeller worked as the Economist at Chancellor Capital Management from 1985 to 1999. There, he developed comprehensive economic forecasts and interpreted economic data for equity and fixed income portfolio managers. Also at Chancellor, Mr. Moeller worked as an equity analyst and was responsible for researching and rating companies in the economically sensitive automobile and housing industries for investment in Chancellor’s equity portfolio. Prior to joining Chancellor, Mr. Moeller was an Economist at Citibank from 1979 to 1984. He also analyzed pricing behavior in the metals industry for the Council on Wage and Price Stability in Washington, D.C. In 1999, Mr. Moeller received the award for most accurate forecast from the Forecasters' Club of New York. From 1990 to 1992 he was President of the New York Association for Business Economists. Mr. Moeller earned an M.B.A. in Finance from Fordham University, where he graduated in 1987. He holds a Bachelor of Arts in Economics from George Washington University.
