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Written By: Rodney Hathaway, Chief Investment Officer
As we approach the final market trading days of 2025, it is a natural time for investors to reflect on where the economy stands and what lies ahead. One important principle rises above short-term headlines and market noise: long-term wealth is built through owning assets.
Consumer Sentiment and Economic Expectations
Investors often attempt to gauge the health of the economy by looking at consumer sentiment. Given that nearly two-thirds of U.S. economic activity is driven by consumer spending, this focus makes sense. When consumers feel confident about job security, income stability, and their overall financial well-being, economists tend to adopt a more optimistic outlook.
What is increasingly important, however, is recognizing the growing divide between consumers who rely primarily on wages and salaries for spending power and those who generate income through asset ownership, such as stocks, bonds, and real estate. This distinction helps explain why traditional measures of sentiment may not always align with market performance.
Market Volatility Versus Market Reality
Market volatility increased last month following the government shutdown and continued concerns around inflation, particularly rising health care costs. These pressures contributed to a sharp 29 percent year-over-year decline in the University of Michigan Consumer Sentiment Index. On the surface, such a decline could suggest a bearish outlook for the economy and capital markets.
Yet market performance tells a different story. Major stock indexes are up roughly 20 percent for the year, and the bond market has gained nearly 7 percent. Consumers who own these assets are likely feeling far more confident than headline sentiment data might imply. U.S. household net worth is approaching record levels at approximately $180 trillion, driven in large part by strong equity market returns in recent years.
The Expanding Role of Asset Ownership
Asset ownership among American adults continues to expand. Approximately 62 percent of adults now own equities in some form, up from 52 percent just ten years ago. Participation in employer-sponsored retirement plans, particularly 401(k)s, has played a significant role in broadening access to the stock market. Nearly 24 million Americans now have a net worth of at least $1 million.
As asset ownership becomes more widespread, the resulting wealth effect is likely to play a greater role in shaping consumer sentiment going forward. While weekly jobs reports remain important, measures of asset accumulation and investment growth may increasingly influence economic confidence.
Retirement, Spending, and the Wealth Effect
This trend is especially meaningful as the Baby Boomer generation moves deeper into retirement. Retirees represent a powerful segment of the consumer economy, with both the time and discretionary income to spend on goods and services. For many, that spending power is supported by gains in investment portfolios accumulated over decades.
Starting Early and the Power of Compounding
The key takeaway is clear: accumulating assets is essential to building long-term wealth. The earlier this process begins, the more powerful the effects of compounding can be over time. Recent initiatives reflect a growing awareness of this principle. Michael and Susan Dell have announced a $6.25 billion commitment to help American children establish investment accounts. In addition, President Trump recently announced that American children born between 2025 and 2028 will receive a $1,000 investment account, with parents able to continue contributing.
We believe this broad-based accumulation of assets has the potential to be a game changer for the next generation of American wealth and financial security. Our advisors are available to discuss how a disciplined approach to asset ownership can support your long-term financial goals, so please don’t hesitate to reach out.