How Financial Markets Impact Household Spending and Debt

The popular expression, “A rising tide lifts all boats,” aptly applies to financial markets as well. A market rally not only creates wealth but can also play a significant role in debt management.

As you can see in the chart below, total U.S. household wealth has increased by $13.5 trillion since the Fed announced it was pivoting to a more accommodating monetary policy following its November 2023 meeting. The stock market has led the way, but the bond market isn’t too far behind, reflecting the potential for increased financial stability and spending power among consumers.¹

Moreover, the latest figures reveal a downward trend in household debt service payments as a percentage of disposable income. This trend prompts the question: how much of this newfound wealth will be redirected toward managing household debt?²

Keep in mind that consumer spending contributes roughly 70 percent of the country’s gross domestic product. The dual advantages of wealth creation and the improving debt position suggest a promising outlook for consumer financial health in the months ahead.

In light of these trends, remember that any concerns regarding the financial health of U.S. households should be tempered with the understanding that household balance sheets are in a better position than they have been in some time.

If you have questions about your household spending, debt situation, or the broader economic environment, please do not hesitate to reach out.

¹ApolloAcadeny.com, March 29, 2024
²Fred.StLouisFed.org, April 4, 202