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Goldman says rich people will drag down the U.S. economy this year

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The share of personal consumption expenditures spent on jewelry is "highly correlated with moves in the stock market," Goldman Sachs economist wrote in a Jan. 15 report.Victor J. Blue/Bloomberg files

The stock-market sell-off is going to be a significant drag on the U.S. economy this year as wealthy households feel its impact, according to Goldman Sachs Group Inc.

Lower equity prices could take half a percentage point off U.S. gross-domestic product growth in 2019, with overall tighter financial conditions restricting expansion by around 1 percentage point, Goldman economist Daan Struyven wrote in a note Tuesday. In October, he had said the positive wealth effect from equity gains in 2017 and early 2018 had likely evaporated.

“The hit to the wealth level from a 1 per cent decline in stock prices is now about three times larger than in the late ’80s for the top-10 per cent of households and a third larger for those in the 50-90th percentiles,” Struyven said, citing the increase in equity holdings as a share of disposable household income.

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