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Published: Thursday, 3/10/2011

Fed: Stocks gains boosted Americans’ wealth last quarter; corporate cash reaches new high

ASSOCIATED PRESS

WASHINGTON — Americans’ wealth grew 3.8 percent in the final three months of 2010, boosted by gains in stock portfolios. Companies, meanwhile, added to their cash stockpiles, which reached their highest point in more than a half-century.

Household net worth rose to $56.8 trillion in the October-December quarter, even though the value of real-estate holdings fell 1.6 percent, the Federal Reserve said Thursday. Last quarter’s gain exceeded the 2.6 percent increase in net worth in the July-September period.

So far this year, stocks have risen more than 3 percent. Further gains in wealth could lead Americans — especially higher-income consumers — to spend more, strengthening the economy.

Net worth is the value of assets such as homes, checking accounts and investments, minus debts like mortgages and credit cards. It’s now risen for two straight quarters after shrinking last spring.

Americans’ net worth is well above the bottom hit during the recession: $49 trillion in the January-March quarter of 2009. Still, it would have to rise an additional 16 percent to reach its pre-recession peak of $66 trillion.

Companies are still holding tight to their cash. Their cash piles grew to $1.89 trillion last quarter. That’s the most on quarterly records dating to 1952.

Economists predict that companies will use more of their cash this year to make capital investments and boost hiring.

In the April-June quarter, net worth posted its first decline since 2009, when Europe’s debt crisis bred turmoil on Wall Street. Since then, stock gains have continued to rebuild Americans’ wealth.

The value of households’ stock portfolios reached $8.5 trillion in the final three months of 2010. That was a 12.3 percent increase from the prior three months.

The Standard&Poor’s 500 index, a broad gauge of the market’s performance, surged 10.2 percent in the October-December quarter. It was the second straight quarter of double-digit gains. The S&P index soared 22 percent in the second half of last year.

Stock values as measured by the Dow Jones U.S. Total Stock Market Index rose $1.6 trillion in value in the final quarter of 2010 and an additional $840 billion so far in 2011. About $16.3 trillion is now invested in U.S. stocks.

About 91 percent of people who have 401(k) retirement savings plans now have more money in their accounts than at the market top in October 2007, according to estimates by Jack VanDerhei of the Employee Benefit Research Institute in Washington. That percentage would be considerably lower without factoring in workers’ continued contributions.

Stocks still have a long way to go to return to where they were 3½ years ago. The S&P 500 is about 16 percent below its peak of 1,565. But it’s back to the level of June 2008, just before the financial crisis erupted.



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