Some believe that the increase in outlays in excess of increases in income have added, on average, about 1 percentage point to the annual growth of gross domestic purchases in the past five years. The Federal Reserve Board's 1998 Survey of Consumer Finances shows the dramatic change. According to the findings, approximately 48 percent of the families participating in the survey either directly or indirectly held stock in 1998 versus approximately 31 percent in 1989. Half of that gain took place between 1995 and 1998. Not surprisingly, family asset values increased considerably, at least on paper, during that same period.
Unrealized gains are gains in the value of assets that are yet to be sold.
Not according to Martha Starr-McCluer, an economist at the Federal Reserve Board, who in a 1998 working paper evaluated several monthly surveys from the University of Michigan's Survey of Consumers conducted in 1997. Only 3.4 percent of the household stockholders in the survey said that they increased their spending or lowered their saving as a result of higher stock prices. Interestingly, in those same University of Michigan surveys, approximately 70 percent of the respondents owning stocks said that they had no plans to liquidate assets to make purchases or to save less in the next year. The stock market and consumer spending, however, may be related, but only passively. That's because, as Starr-McCluer reasons, the stock market is a passive predictor of information.