
This is one of the great ironies of life. Those who need it the least, get it the most. That’s what happened in 2020 as the richest 1% of US households took about 35% of the extra wealth generated. This is according to the latest quarterly report of household wealth by the Federal Reserve.
Poorest 50% of US only receive marginal gains
In stark contrast to the above, the poorest half of the population only received about 4% of the overall gains.
This is one of the reasons that President Biden is planning a tax increase on the wealthiest as the Gov’t seek to redistribute wealth.
US equities rise only mostly benefitted the wealthy
Unsurprisingly equity holders saw the largest wealth gains last year after the stellar run higher in stocks. The 2020 equity recovery was not V-shaped, or L shaped, but K shaped as US stocks made fresh highs in a stimulus-driven year. However, equities are mostly owned by the top 10% of US households. The wealthy were further helped as mortgage debt was reduced, even as house prices climb.
Cash was king in 2020
Finally, one other significant finding from the Fed was that more higher net worth households put their money into cash. The dash to cash makes sense in these uncertain markets as well as making discount purchases on flash sales induced by financial uncertainty. See the chart below.