In September, US household wealth reached $100 trillion, and ostensibly it seems like a positive development for US markets. But, in comparison to the stagnation in actual US household income, it is quite evident that the rapid growth rate of US household wealth cannot be sustained in the long-term.
Speaking to Business Insider, AJ Bell investment director Russ Mould stated:
"Household net worth cannot sustainably grow this much faster than incomes. Assets have been bid up and at some stage there has to be chance that they correct, just as happened in 2000 and 2007."
According to Mould, the US stock market experiencing one of the strongest bull markets in history and the real estate market continuing to increase in value led to an abrupt increase in household wealth. However, if household wealth cannot be backed by stable income, then the market will be vulnerable to a major correction.
"The difference is likely to be accounted for by the surge in the value of financial and other assets — equities, bonds, property and rankly everything from vintage cars to art to wine to baseball cards. And this is one warning that at some stage another collapse in financial markets will sweep around the globe," Mould added.