SINGAPORE (BLOOMBERG) - The stock market sell-off is going to be a significant drag on the US economy this year as wealthy households feel its impact, according to Goldman Sachs Group.

Lower equity prices could take half a percentage point off US 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 on Tuesday (Jan 15). 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.

Struyven argued against the idea that the wealth effect from the stock market might be limited due to a higher concentration of stock ownership than in previous decades, and a lower propensity to spend among rich households. To prove that this thesis doesn't hold up, he cited increases in equity holdings, as well as a high sensitivity of luxury goods spending to stock market fortunes, as evidence.

That's at odds with a paper from the National Bureau of Economic Research in 2013 that finds "at best weak evidence of a link between stock market wealth and consumption", and asserts that the housing market has much more of a wealth effect.

The share of personal consumption expenditures spent on jewellery is "highly correlated with moves in the stock market", Struyven wrote in Tuesday's report.

"Focusing on a sample since 1995, we find large effects of the stock market on luxury spending," Struyven said. Regressions of spending growth on stock price changes confirm a strong relationship "for jewellery and watches, pleasure boats and pleasure aircraft".