Is Wealth Worth Anything

This report examines the mechanics of the 'wealth effect,' arguing that rising asset prices only stimulate consumer spending if those assets can be effectively converted into cash.

Key Takeaways

• 1.Wealth effects only boost consumer spending if assets can be converted into cash, which requires liquidity in the market.
• 2.Consumers can monetize wealth by selling assets, borrowing against them (e.g., remortgaging), or reducing their rate of active saving.
• 3.There is a natural limit to the wealth effect; if cash savings are exhausted, consumption stops regardless of asset price levels.

Table of Contents

• Blog
• Global asset class preferences definitions
• Appendix
• Risk information
• Generic investment research – Risk information

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