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Equities have surpassed real estate as the largest contributor to US household wealth for the first time since World War II, according to a Goldman Sachs report. The investment bank said strong stock market gains, particularly since the global financial crisis, have significantly increased household exposure to equities, with technology stocks playing a major role. While this shift has supported consumer spending through rising wealth, Goldman cautioned that higher equity exposure also increases the risk of financial losses if markets witness a sharp correction amid elevated valuations and economic uncertainty.
Equities have overtaken real estate as the largest source of household wealth in the United States for the first time since World War II, according to a report released by Goldman Sachs. The investment bank said the shift reflects the growing role of stock markets in driving household wealth and supporting consumer spending.
According to Goldman Sachs, gains in equity markets have become the primary contributor to household wealth creation in recent years. The bank noted that rising stock values have also strengthened the wealth effect, where increasing asset values encourage consumers to spend more, thereby supporting economic activity.
The report stated that households in the United States and Australasia now allocate nearly half of their financial assets to equities, exceeding the levels recorded during the dot-com boom. This highlights the increasing preference for stock market investments over other financial assets in these regions.
Goldman Sachs also found that households in the United States, Australia and Sweden have the highest exposure to equities. In contrast, households across Europe and Japan continue to maintain relatively lower investments in stocks, with a larger share of their financial wealth held in cash and other lower-risk assets.
The bank attributed the growing dominance of equities to the sustained rally in global stock markets following the global financial crisis, with particularly strong gains recorded over the past few years. It added that technology companies have accounted for an increasing share of equity portfolios, further strengthening the position of stocks within household wealth.
The report also pointed to ongoing regulatory reforms in parts of Europe, including changes to pension systems in the Netherlands and Germany, which could gradually encourage pension funds and insurance companies to increase their investments in equities over time.
Despite the positive impact on wealth creation, Goldman Sachs cautioned that greater dependence on equity markets also increases financial risk. The bank warned that households with higher stock market exposure could be more vulnerable to losses if markets experience a significant correction, particularly at a time when equity valuations remain elevated and macroeconomic uncertainty continues.
Historically, real estate has been one of the largest components of household wealth in the United States due to widespread home ownership and long-term appreciation in property values. However, the prolonged rally in equity markets, driven by strong corporate earnings, technology-led growth and sustained investor participation, has altered the composition of household wealth, marking a notable shift in the country's investment landscape.
Source PTI
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