US Household Wealth Fell for The First Time In 2 Years. Here’s Why It Will Bounce Back

After stocks fell sharply earlier this year as new tariffs were rolled out, the average American households’ net worth fell for the first time in almost two years. Many, but not all of them, are expected to bounce back as the worst of the tariffs have been paused or rolled back.

The Federal Reserve said last week that household net worth decreased to $169.3 trillion in the first quarter of 2025. That’s a $1.6 trillion drop, and the first decline since the second quarter of 2023. Household net worth was at a record high in 2024’s fourth quarter.

The majority of this decline is likely attributed to the drop in stock values after President Donald Trump’s tariff announcements worried investors and consumers. The S&P 500, a key indicator of how well American companies and their stocks are doing, fell by almost 20% from February to April.

However, after Trump pulled back or temporarily paused the most extreme tariffs, the S&P bounced back and now stands only 1.5% below its peak in February.

The market’s recovery should help the roughly 60% of households that hold stocks recover a portion of their net worth in the second quarter, said Priscilla Thiagamoorthy, senior economist at BMO Bank.

However, Thiagamoorthy said lower- and middle-income households are less likely to see a significant gain in their net worth as the stock market improves.

“Lower- and middle-income families have far less invested in the stock market compared to the ultra wealthy,” Thiagamoorthy said. “Higher stock values push up net worth, but these households aren’t experiencing that wealth effect in the same way.”

Additionally, Thiagamoorthy said lower- and middle-income households still feel pinched by food inflation, which remains relatively high, since they typically spend a larger share of their income on groceries.