Warren Buffett and Jeff Bezos
Lacy O’Toole | CNBC; Getty Images
According to the Federal Reserve, the wealth of America’s richest people, such as Warren Buffett and Jeff Bezos, increased by a total of $6.5 trillion last year, largely due to rising stock prices and financial markets.
The total wealth of the 1% hit a record $45.9 trillion at the end of the fourth quarter of 2021, according to the Federal Reserve’s latest Household Wealth report. Her wealth has increased by more than $12 trillion, or more than a third, over the course of the pandemic.
“The numbers are amazing,” said Edward Wolff, an economics professor at New York University. “The pandemic wealth boom is certainly at or near the peak of any wealth boom in the last 40 years.”
Data shows that the top 1% owned a record 32.3% of the nation’s wealth at the end of 2021. The wealth share of the bottom 90% of Americans has also declined slightly since before the pandemic, from 30.5% to 30.2%.
Asset growth at the top may have stalled or declined slightly this year due to stock declines.
The main drivers for the wealthiest Americans over the past year have been stocks and private companies. About $4.3 trillion of total gains for the 1% last year came from corporate stocks and mutual fund shares, according to Fed data. The top 1%’s stock portfolios are now worth $23 trillion, and they own a record 53.9% of the stocks they hold individually, according to the central bank.
Despite claims of a democratization of the stock market, with millions of new retail investors opening trading accounts on Robinhood and other platforms, stock ownership in America has actually become more concentrated than before the pandemic. The top 10% owned a record 89% of individually held company shares and mutual fund shares at the end of 2021.
A 2021 Gallup found that 56% of Americans owned at least some stocks — slightly above the 55% average in 2019 and 2020, but still below the 62% peak before the 2008 financial crisis.
More wealth inequality
Rising stock prices have created a “feedback cycle” for wealth and inequality, said Wolff, a professor at NYU. As stock ownership moves toward the top of the wealth ranks, rising stock prices move more money to wealthier Americans. Because the wealthy can afford to save and invest more of their extra wealth, more of the nation’s wealth gains flow to the stock market. This drives stock prices even higher.
“Increasing wealth inequality drives the stock market, which in turn leads to even more wealth inequality,” Wolff said.
Private corporations were also a powerful engine of wealth for those at the top. According to the Federal Reserve, the 1% own 57% of private companies. The value of the private companies of the wealthiest rose 36%, or $2.2 trillion, last year.
“Small businesses are really crucial when talking about the sources of their wealth,” Wolff said.
The 1% has also benefited slightly from rising property values. Their real estate holdings increased by nearly $1 trillion during the pandemic to a peak of $5.27 trillion.
But their share of the country’s real estate actually declined slightly during the pandemic as home prices and home ownership rose in the rest of the country as well. Real estate is far more widely owned than stocks, so the rise in home prices has helped the middle class a little more than the rich. The top 1% owned 14% of the country’s real estate at the end of 2021, up from 14.5% before the pandemic in late 2019.
The bottom 90% of Americans added $2.89 trillion to their wealth last year through real estate.
“The real estate boom has benefited the middle class,” said Wolff. “Without that, wealth inequality would have grown even more.”
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