The richest 1% gained $6.5 trillion in wealth last year

Warren Buffett and Jeff Bezos

Lacy O’Toole | CNBC; fake images

The wealth of the richest people in the United States, such as Warren Buffett and Jeff Bezos, increased by a total of 6.5 trillion dollars last year, mainly driven by the rise in stock prices and financial markets. according to the Federal Reserve.

The total wealth of the top 1% hit a record $45.9 trillion at the end of the fourth quarter of 2021, according to the latest Federal Reserve report on household wealth. Their fortunes increased by more than $12 billion, or more than a third, during the course of the pandemic.

“The numbers are staggering,” said Edward Wolff, an economics professor at New York University. “The pandemic wealth boom certainly ranks at or near the top of all the wealth booms in the last 40 years.”

The top 1% owned a record 32.3% of the nation’s wealth at the end of 2021, the data shows. Similarly, the share of wealth owned by the bottom 90% of Americans has fallen slightly since before the pandemic, from 30.5% to 30.2%.

Wealth growth at the top has either stalled or dipped slightly so far this year on the back of falling stocks.

The main drivers for the richest Americans last year were stocks and private companies. About $4.3 trillion of overall earnings for the top 1% last year came from corporate stocks and mutual fund shares, according to Fed data. The top 1%’s stock portfolios are now worth $23 trillion and own a record 53.9% of individual shares, according to the central bank.

Despite claims of a democratization of the stock market, with millions of new retail investors opening trading accounts on Robinhood and other platforms, US stock ownership has become more concentrated than before the pandemic. The top 10% owned a record 89% of individually owned corporate stocks and mutual fund shares at the end of 2021.

A Gallup in 2021 found that 56% of Americans owned at least some stocks, slightly above the 55% average in 2019 and 2020, but still below the 62% peak before the 2008 financial crisis.

More wealth inequality

Rising stock prices have created a “feedback loop” for wealth and inequality, said Wolff, a professor at New York University. Because stock ownership skews toward the top of the wealth ranks, rising stock prices transfer more money to wealthier Americans. Since the wealthy can afford to save and invest more of their additional wealth, more of the nation’s wealth gains flow into the stock market. That pushes stock prices even higher.

“Increasing wealth inequality drives the stock market, which then drives higher wealth inequality,” Wolff said.

Private companies have also been a powerful engine of wealth for those at the top. The top 1% own 57% of private companies, according to the Federal Reserve. The value of private companies owned by the wealthiest rose 36%, or $2.2 trillion, last year.

“Small businesses are really key when it comes to the sources of their wealth,” Wolff said.

The top 1% has also benefited modestly from rising home values. His real estate holdings rose by just under $1 trillion during the pandemic, to peak at $5.27 trillion.

But its share of the nation’s real estate actually fell slightly during the pandemic, as home prices and home ownership rose in the rest of the country as well. Real estate is much broader than stocks, so rising home prices have helped the middle class a little more than the wealthy. The top 1% owned 14% of the nation’s real estate at the end of 2021, up from 14.5% before the pandemic at the end of 2019.

The bottom 90% of Americans added $2.89 trillion to their wealth last year thanks to real estate.

“The housing boom has benefited the middle class,” Wolff said. “If it hadn’t been for that, wealth inequality would have grown even more than it did.”

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