The Federal Reserve released its latest comprehensive data on the financial situation of households and companies, covering the last three months of 2018. These data show a number of economic risks for families. Savings are increasingly exposed to a potential loss on Wall Street. Student and car loans are rising faster than incomes. And companies are not using their tax cuts to invest in a way that would boost workers’ wages. The result then is more financial risk among continued slow income and wage growth.
The stock market took a tumble at the end of 2018 and people’s finances took a hit. . Financial assets and total wealth relative to after-tax income fell to their lowest level since June 2016. The fact that a stock market drop in the span of three months could wipe out this much of people’s savings illustrates the enormous risk that many people took by keeping an ever-growing share of their savings in an ever more highly valued stock market. The inevitable drop in the market then destroyed more future retirement security than would have been the case with more cautious investment strategies.
The above excerpt was originally published in Forbes.
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