The wealth of the 1% just hit a record $44 trillion

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The wealth of the top 1% hit a record $44.6 trillion at the end of the fourth quarter, as an end-of-year stock rally lifted their portfolios, according to new data from the Federal Reserve.

The total net worth of the top 1%, defined by the Fed as those with wealth over $11 million, increased by $2 trillion in the fourth quarter. All of the gains came from their stock holdings. The value of corporate equities and mutual fund shares held by the top 1% surged to $19.7 trillion from $17.65 trillion the previous quarter.

While their real estate values went up slightly, the value of their privately held businesses declined, essentially canceling out all other gains outside of stocks.

The quarterly gain marked the latest addition to an unprecedented wealth boom that began in 2020 with the Covid-19 pandemic market surge. Since 2020, the wealth of the top 1% has increased by nearly $15 trillion, or 49%. Middle-class Americans have also seen a rising wealth tide, with the middle 50% to 90% of Americans seeing their wealth increase 50%.

Economists say the rising stock market is giving an added boost to consumer spending through what is known as the "wealth effect." When consumers and investors see their stock holdings soar, they feel more confident spending and taking more risk.

"The wealth effect from surging stock prices is a powerful tailwind to consumer confidence, spending and broader economic growth," said Mark Zandi, chief economist of Moody's Analytics. "Of course, this highlights a vulnerability of the economy if