Household wealth in the U.S. increased from October through December, as gains in stock portfolios and home prices boosted Americans’ finances.

Net worth for households and non-profit groups rose by $2.95 trillion in the fourth quarter, or 3.8 percent from the previous three months, to a record $80.7 trillion, the Federal Reserve said today from Washington in its financial accounts report, previously known as the flow of funds survey.

More jobs, higher stock prices and improved home values have all helped consumers clean up their balance sheets in the years following the biggest recession since the Great Depression. Additional gains in the labor market and household wealth will be needed to give consumers the means to spend on goods and services, boosting economic growth.

David Fuller's view

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It will be the fifth year anniversary for Wall Street’s bull market next week, driven by a gradual recovery, corporate share buybacks and especially, an aggressively accommodative monetary policy, despite the current tapering.

Reinhart & Rogoff and a few other economic historians have said that it takes a minimum of five to seven years, on average, for an economy to recover from a credit crisis recession.  I expect the slow, somewhat erratic but gradual economic recovery in the USA and many other countries to continue, with the help of generally accommodative monetary policies, increasing international trade and technological innovation.

These factors will remain an even stronger tailwind for stock markets until a combination higher valuations, less accommodative monetary policy, higher interest rates and possibly adverse geopolitical events curb demand for equities.  There is also likely to be a choppy aspect to the overall background for stock markets in 2014.