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