A booming stock market has propelled U.S. household wealth to reach an all-time high, surpassing $154 trillion in the second quarter, according to data released by the Federal Reserve on Friday. This surge in wealth was supported by a rebound in property values, and it marked a significant increase from the $148.79 trillion recorded at the end of the first quarter.

Household net worth increased by 3.7% to $154.28 trillion during the period from April through June. This data highlights that households have not only recovered from the wealth losses experienced during a bear market for stocks and declining real estate values last year but have also exceeded previous records. This rebound can be attributed to the Federal Reserve’s aggressive efforts to combat inflation through a series of rapid interest rate hikes.

The S&P 500 total return index, which includes reinvested dividends, delivered an impressive 8.7% return in the second quarter, contributing significantly to the increase in household net worth. Real estate also played a pivotal role, with property values rising for the first time since the second quarter of 2022.

Household wealth at the end of June exceeded the previous record set in the first quarter of 2022 by approximately $1.8 trillion, representing a 1.2% increase.

However, the data also revealed a decline in households’ cash reserves for the fifth consecutive quarter, with holdings in bank deposits and money market mutual funds decreasing to $17.7 trillion. This reduction in cash reserves is notable, as it has been a key factor supporting consumer spending. Bank deposits have declined by more than $200 billion, while money market fund balances have reached a record high of over $3.5 trillion.

Debt levels continued to rise across households, businesses, and governments during the second quarter, albeit at varying rates. Total nonfinancial debt increased at an annualized rate of 6.3%, the highest since the first quarter of 2021, reaching $71.2 trillion. Federal government debt experienced the most significant increase, growing at a rate of 12.7%, driven by a surge in bond issuance after an agreement to suspend the federal debt ceiling. In contrast, business debt growth slowed, rising at a rate of just 1.9%, the slowest since late 2020.

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