Goldman says rich people will drag down the U.S. economy this year

The share of personal consumption expenditures spent on jewelry is "highly correlated with moves in the stock market," Goldman Sachs economist wrote in a Jan. 15 report.Victor J. Blue/Bloomberg files

The stock-market sell-off is going to be a significant drag on the U.S. economy this year as wealthy households feel its impact, according to Goldman Sachs Group Inc.

Lower equity prices could take half a percentage point off U.S. gross-domestic product growth in 2019, with overall tighter financial conditions restricting expansion by around 1 percentage point, Goldman economist Daan Struyven wrote in a note Tuesday. In October, he had said the positive wealth effect from equity gains in 2017 and early 2018 had likely evaporated.

“The hit to the wealth level from a 1 per cent decline in stock prices is now about three times larger than in the late ’80s for the top-10 per cent of households and a third larger for those in the 50-90th percentiles,” Struyven said, citing the increase in equity holdings as a share of disposable household income.

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