How Important Is the Stock Market Effect on Consumption?

The second half of the 1990s has seen substantialchanges in the wealth of Americanhouseholds, primarily owing to movements inthe stock market. From mid-1994 to mid-1997, the aggregate value of household sector equityholdings (including those owned by nonprofits, mutualfunds, and pensions and other fiduciaries) roughly doubled,for a dollar gain of about $5.2 trillion.1 Since then, stockmarket values on balance have continued to rise, but therehave been massive fluctuations within a wide band; thedollar value of movements within the band—from the lowin October 1997 to the recent highs—has been greaterthan $3.0 trillion.[...]