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The quickest way to gain wealth over the past few years was by investing in the stock market, which rose faster than housing and other assets — but that wealth hasn’t been distributed evenly among Americans.
Inequality by race and age in the U.S. persists in part because ownership of financial assets varies widely between different groups, according to the Federal Reserve Bank of New York’s latest report on wealth inequality, released Wednesday. For example, more white households hold equities and mutual funds, which have performed exceptionally well and boosted investors’ net worth.
Young people also increased their investments in equities between 2019 and mid-2023. As a result, the net worth of white people and of people ages 18 to 39 during this time grew faster than the wealth of Black and Latino people and of older people, respectively, the report found.
“The groups with more exposure to businesses, equities and mutual funds experienced much faster financial asset growth,” according to the New York Fed report.
The S&P 500
SPX
saw cumulative returns of 91.8% between 2019 and mid-2023. While nearly two-thirds of white families own stock, only 40% of Black families do, according to 2022 data from the Federal Reserve.
Similarly, the Case-Shiller index, which measures home-value appreciation, grew by 51.9% during that period. Once again, those gains were unevenly concentrated, as about 73% of white families own their homes, compared with 46% of Black families and 51% of Latino families. “White individuals experienced sharper increases in the value of real-estate assets” from 2019 to mid-2023, the New York Fed report said.
From the archives (November 2023): These Americans could afford a mortgage. But they’re stuck in a cycle of renting.
White people’s wealth grew the most through the pandemic
The racial wealth gap worsened during the pandemic. Adjusted for inflation, the wealth of Black households — more than 50% of which is held in retirement accounts — fell 1.4% between the first quarter of 2019 and the third quarter of 2023 to $4.6 trillion, despite some recovery over the last year.
The vast majority of wealth in the U.S. continues to be held by white people, whose collective net worth rose 29% from 2019 to 2023, to $112.77 trillion. This far exceeded gains for Latino individuals of 20%, to $3 trillion. No data was reported for Asian people.
The divergence during this time is a partly result of gaps in participation in the stock market, which rose considerably during this period. Stock equity makes up just 4% of Black wealth but 30% of white wealth, according to a report by the Brookings Institution published last month. “Stock equity appreciates more rapidly in comparison to housing equity, catalyzing wealth accumulation drastically for those who historically already hold stocks,” that report said.
The gap between Black and white stock ownership is “partly because Black families have fewer funds with which to invest, and partly because Black communities have historically struggled to trust the stock market,” McKinsey & Co. consultants wrote in a separate 2019 report.
Young people increased their wealth more quickly than other age groups
When evaluated by age, wealth increased for all groups between 2019 and 2023, but the net worth of people age 39 and younger jumped by 80%, to $8.86 trillion, compared with a 30% increase for those 55 and older (to $97.3 trillion), and just 10% for those ages 40 to 54 (reaching $27.3 trillion), according to the New York Fed researchers.
The report did not break out the changes in wealth by both age and race.
Between 2019 and 2023, the youngest and oldest groups significantly increased their holdings of equities and mutual funds. As a result, “those under 40 saw a greater than 50% increase in the real value of their financial assets,” and those over 54 saw about a 20% increase, the report said.
Unfortunately for older millennials and Gen X-ers, those ages 40 to 54 saw only a 3% increase in their financial assets.
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