The wealth of the 1% only reached $44 trillion.

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

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

While their real estate values ​​rose slightly, the value of their private businesses declined, essentially canceling out all other gains outside of stocks.

The quarterly gain is 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 percent has grown by nearly $15 trillion, or 49 percent. Middle-class Americans have also seen a surge in wealth, with the middle 50% to 90% of Americans seeing a 50% increase in their wealth.

Economists say a rising stock market is boosting consumer spending in what’s called the “wealth effect.” When consumers and investors see their stock holdings grow, they feel more confident spending and taking more risk.

“The wealth effect from rising stock prices is a powerful tailwind for consumer confidence, spending and broader economic growth,” said Mark Zindi, chief economist at Moody’s Analytics. “Of course, it highlights the weakness of the economy if the stock market wobbles. It’s not the most likely scenario, but it’s one that makes stocks overvalued.”

Even so, the latest report also highlights how the U.S. remains the heaviest in stock ownership, with the top 10% of Americans individually holding 87 percent of stocks and mutual funds, according to the Fed report. % owns. The top 1% own half of all stocks held individually.

Economists say a booming stock market brings big benefits to the rich, mainly by boosting consumer and spending markets. The wealth of middle-class and low-income Americans depends more on wages and home values ​​than stocks.

“Households in the top one-third of the income distribution and with the largest share of stock holdings account for nearly two-thirds of consumer spending,” Zandi said.

Liz Ann Saunders, Chief Investment Strategist Charles Schwabsaid stocks represent a growing portion of the assets of the top 1%. Stocks accounted for 37.8% of the total share of household assets for the top 1% at the end of 2023, up from a recent low of 36.5%.

Yet because the wealthy don’t need to spend much of their earnings — a phenomenon known as the marginal propensity to consume — Saunders said the extra stock of wealth for the 1% of the consumer economy But there may be no substantial effect.

According to the Conference Board, it noted that consumer confidence among those earning more than $125,000 a year has been in a “secular decline” since 2017.

“While a bump in stock prices may be associated with stronger confidence, it does not necessarily indicate stronger spending at the high end,” he said.

with the S&P 500 Already up 10 percent this year, the wealth of the upper class is likely to reach a record high by the end of 2023. While inequality fell slightly in 2021 and 2022, while wages rose and house prices rose, the wealth gap returned to pre-pandemic levels.

At the end of the fourth quarter the top 1% held 30% of the country’s wealth, while the top 10% held 67% of all wealth.