I wanted to start with the big picture for the first Chart of 2013. Today’s chart comes courtesy of the Global Macro Monitor blog, which pulled the chart from Federal Reserve and Bureau of Economic Analysis:
The chart shows how volatile household wealth has been over the past 15 years in the U.S., with major moves higher and lower in a short amount of time. What most surprised me when I saw this chart was the small increase since 2009. Since we are most focused on the stock market, I assumed that household wealth as a percent of disposable income would be near its highs, but I forgot that the largest portion of American household wealth is tied up in the housing market. As a result, the average American has hardly felt the wealth benefits of the 4 year bull market in stocks.
The chart is particularly relevant since the focus of many politicians during the fiscal cliff debate was on preventing an adverse stock market reaction over the course of the negotiations. The stock market in actuality has a relatively small impact on household wealth for the majority of Americans, so it’s likely the wrong measuring stick to use, particularly when debating 10 year budget deals.
Perhaps the most important implication of this chart, though, is that the key for the average American’s pocketbook is the housing market. I will be watching the housing sector closely to see if it can continue last year’s strength.