Data from the Federal Reserve confirmed an unexpected drop in US household net worth in the early months of 2025, the first such occurrence in nearly two years. This was largely due to the unfavorable market response to newly imposed tariffs, causing a sharp fall in stocks. The setback hit American households, with an evident effect on their net worth which fell to $169.3 trillion, a decrease of $1.6 trillion from the record high of 2024's fourth quarter.
The downward trend in stock values was a reaction to President Trump's tariff pronouncements, which set market players on edge. The consequential drop was borne out in the S&P 500, a benchmark of the American business landscape, which saw a nearly 20% decline between February and April.
However, the suspension or withdrawal of the harshest tariffs led to a market rebound. The S&P 500 registered a recovery, and is now just 1.5% shy of its peak in February. About 60% of households that own stocks can expect some recovery in their net worth in the second quarter, according to BMO Bank’s senior economist, Priscilla Thiagamoorthy.
Nonetheless, Thiagamoorthy predicts that improved stock market conditions may not yield substantial net worth gains for lower- and middle-income households, as they have comparatively smaller investments in the stock market. In addition, skyrocketing food prices continue to put pressure on these households, who allocate a larger part of their income on groceries.