Even though Canadian household wealth has “reached unprecedented highs” it will be tested in the coming months as the global economy slows down as well as a return to historical rates of return, according to a Scotiabank report.

And as the heady pace of home and equity price depreciation inevitably slows, it will remove much of the strong “wealth effect” that has supported big-ticket consumer spending so far this decade. It would also force many households to raise their conventional level of saving to meet their long-term retirement goals, the report, titled Canadian Household Finances suggests.

“The typical household investment portfolio has become both less liquid and more exposed to market risk than in the past, reflecting the more rapid growth in holdings of stocks, mutual funds and tax-sheltered pension vehicles relative to traditional cash and term deposits,” the report says.

“This more aggressive investment strategy has been positive from a longer-term wealth-building standpoint. From a short-term cyclical perspective, however, it leaves households more exposed to adverse economic developments, such as a sharp correction in the buoyant housing market, increasing joblessness attributable to slower U.S. demand for Canadian exports, or increased financial market and interest rate volatility,” it added.

Nevertheless, the report also notes that the collective net worth of Canadian households increased 10% over the last year to a record $4.97 trillion. Combined with the previous two years, household wealth has increased 31% over the last three years.