US household wealth has exploded. In late 2025 the net worth of US households will have surpassed $181 trillion, largely due to a soaring stock market and rising home prices.
Recently, the President declared that the United States is experiencing an “economic boom”. The President also celebrated “defeating” inflation.
The majority of Americans also say that the cost of life is worse.
The gap between the two statements explains today’s economic situation better than any one inflation rate.
Shared wealth is not the same as record wealth
The net worth of US households and non-profit organizations is expected to rise by $6 trillion alone in the third quarter 2025.
The majority of this came from the equities which were lifted by AI driven rally and housing that continues to retain value in spite of higher interest rates.
While this may look like a great success on paper, the gains in reality are not as even. This is because, in this instance, assets are used to measure wealth instead of pay checks.
The older households and those with higher incomes are disproportionately the owners of stocks and houses.
Most families with lower incomes or younger members own either or both, but only in small quantities.
They do not see rising prices as a positive. These prices feel like an obstacle.
Higher home prices are good for homeowners, but they make it harder to buy a house.
Stock market booms boost retirement savings, but little helps those living on a monthly income.
How record wealth and widespread frustration can exist together
While the costs of everyday life remain unchanged, economic growth adds value to existing assets.
Prices remained high despite a drop in inflation
The headline inflation rate has decreased. It dropped from a peak of over 9% in the year 2022 to just under 2.7% by 2025.
This is an improvement from a macro-perspective. It is quite different from a household’s perspective.
Consumers are more concerned about how quickly prices increase than whether or not they fall.
All of these items are now significantly more expensive than they used to be before the epidemic.
The inflation rate has not slowed down to the point that an increase of 25% in a grocery bill over a period of three years will result in fewer groceries being purchased. The inflation rate simply slows down.
Recent data highlight the problem. The problem is that food prices increased by 0.7% during December, which was the highest monthly rise in 3 years.
These are the effects that households feel every time they go to the store. Even though inflation has decreased, people still respond well to the same price levels.
A recent poll revealed that 64% voters believe the high cost of living to be a very serious issue.
Nearly half of the voters believe that US economic growth is in decline.
Asset economy and cash flow economy
Imagine two countries running simultaneously.
First, we have the asset-based economy. Stocks, real estate and private investment are all doing well.
AI excitement lifted the S&P by about 16%, and the Nasdaq even higher. Home prices are rising despite the higher rates of mortgages.
Cash flow is the second type of economy. Here, you’ll find rent, food, insurance, wages and interest. Conditions are more difficult here.
The wage growth rate has decreased. In some areas of 2025, the labor market will be weaker.
The consumer credit market continues to grow, and household debt is growing above 4% annually.
Families that are tied to asset-based economies experience relief. Portfolios that grow faster than expenses.
Stress is experienced by households that are dependent on the economy of cash flow. The household borrows more money to pay for basic needs and feels exposed to price increases.
National accounts add both groups to one average. The daily life is not.
The pressure to credit is increasing
Credit cards are one of the best indicators to show this division. Credit card rates have risen to close to 20 percent, which is higher than they were before the pandemic. They are also much higher than other benchmarks.
Federal Reserve Bank of New York research shows that spreads are not explained solely by risk. The role of market power, consumer inertia, and marketing strategies is significant.
Many households now use credit to pay for essentials. Revolving credit is increasingly used to pay for food, utilities and medical expenses.
When interest rates so high, even temporary price spikes can lead to long-term financial stress. Even those with stable jobs are stuck paying for last year’s grocery purchases.
The debates over credit card rate caps reflect the real problems, even though they often disregard legal and institution limits.
It is a simpler issue. The credit market has been a pressure valve in an economy that is experiencing a price reset, yet incomes are not keeping pace.
The data and mood are divergent
Over the years, markets and growth have boosted public confidence. This link is weakening, in part because of memory.
Most people compare prices today not with last month but rather to 5 years ago. Ownership is another factor. If you don’t own assets, gains that accumulate to your balance sheet seem distant.
A trust issue also exists. Leaders who point out record GDP or wealth while ignoring affordability issues are denying the experience of households.
Even in times of economic growth, the majority say that they feel like things are getting worse. This reaction is rational. This reflects the direction of growth.
At the top, the economy is stable while at the bottom it remains tight. The numbers on paper will remain good until policy tackles price levels, debt loads, and the access to assets.
It is clear from the lessons of last year that even a prosperity of trillions of dollars can be unaffordable if it ignores what people are actually living in.
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