The Impact of the Stock Market Crash of 2008-2009 on the Wealth of U.S. Households
Journal of Financial Planning, 29 (2), 52-58
25 Pages Posted: 12 Jan 2016 Last revised: 9 Jul 2019
Date Written: January 10, 2016
1. This research examines the potential impact of the stock market crash of 2008-2009 on U.S. working households. The Great Recession caused financial problems for many households in terms of unemployment, business losses, and decreases in real estate values, but the broadly based decreases in stock indexes impacted households in all areas of the United States.
2. Among households age 30 to 70 with a head employed full-time, the ratio of equity assets to total wealth (net worth plus human wealth) had a mean value of 4.2%.
3. The decreases in stock market indexes between 2007 and 2009 had substantial impacts on the wealth of only a small proportion of working households, with a mean potential loss in wealth due to stock market decreases of only 1.3%.
4. The relative impact of the stock market declines was highest for the oldest working households, but the mean potential loss in wealth for that group was only 1.9%, and only 5% of households in that age range had a potential loss of 8.0% or more of wealth.
5. By framing the potential wealth loss from severe stock market decrease as a percent of wealth including human wealth, financial advisors can add another perspective to assist clients in thinking rationally about portfolio choices.
Keywords: Stock market crash, Total wealth, Wealth shock
JEL Classification: D14, D91, E21, E32, G11
Suggested Citation: Suggested Citation