American and European households may be growing wealthier at a similar pace, but the composition of that wealth is strikingly different, and those differences are shaping how each economy responds to the current turmoil stemming from the Middle East.
That is the conclusion of a new note from UBS, which compared household balance sheets on both sides of the Atlantic using data from the US Federal Reserve and the European Central Bank.
Stripping out pensions and life insurance to make the figures comparable, US households hold equity worth 144% of gross domestic product (GDP) against just 76% in the eurozone.
Europeans, by contrast, hold far more of their wealth in housing, economist Arend Kapteyn points out, with property assets running around 118 percentage points of GDP higher than in the US, reflecting differences in homeownership rates, house price expectations and rental market structures.
The practical consequence, the UBS economist said, is that this "wealth composition leaves the US more exposed to equity market headwinds, while the euro area is more sensitive to housing-related valuation effects during rate-hiking cycles."
Both vulnerabilities are "relevant as geopolitical risks, including the Middle East conflict, evolve," Kapteyn said.
On a net basis, eurozone household wealth amounts to around 401% of GDP against 325% in the US – suggesting Europeans are, on paper at least, the wealthier of the two.