U.S. households lost about $6.1 trillion of their net worth in the second quarter of this year. The Federal Reserve's (Fed) flow of funds data, reported by Bloomberg shows that the figure represents the largest quarterly loss in history.
This is the second consecutive quarterly decline. At the end of 2021, the figure was at $150 trillion. In the first quarter of this year, it was already around 149.9 trillion. According to the latest report, household wealth plummeted to $143.8 trillion. Reuters points out that the reason for the fall has to do with the fact that the bear market shares far exceeds real estate values.
Record losses broken
The net loss of household wealth in the second quarter exceeded the previous record drop from two years earlier by nearly $30 billion, from back when the onset of the Covid-19 pandemic disrupted financial markets. That decline, from the second quarter of 2020, remains the largest regarding the rate of decline in percentage terms, at 5.2% versus 4.1% in the most recent report.
The sharp drop was accompanied by a significant tightening of financial market conditions, a plunge in equity values - by $7.7 trillion in the second quarter - and a record pace of consumer credit growth not seen since 2001.
Zerohedge notes that at a global level, equity, debt and capital markets lost about $23 trillion in "wealth" in the second quarter. They attribute the loss to Russia's invasion of Ukraine which led to a rise in commodity prices, making shares fall based on the fear of a recession and forced central banks around the world to tighten their policies in order to fight against runaway inflation.