American Stock Ownership is Soaring: Here’s What it Means for the Economy

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In 2024, about 61.5% of Americans own stocks, which is the highest level since the 2008 financial crisis. But what does it really mean for the economy? Before you ask yourself that question, it’s worth noting that the wealthiest 10% of Americans still possess 93% of the market. And the bottom 50% of Americans collectively own only 1% of all stocks available. So, as the number of new people entering the stock market are likely among the 1%, does this growing number really indicate a broadening of financial literacy, or is it merely exacerbating inequality in asset ownership?

A 2023 Gallup report revealed that individuals who are non-white, have higher annual household incomes, and hold advanced degrees are increasingly investing in stocks. However, what’s unfortunate is that these three things often go hand in hand. Gender doesn’t seem to have a big impact on this trend, but the biggest differences in how people invest come from their income and education levels. For example, a whopping 84% of households making over $100,000 a year own stocks, while only about 29% of households earning $40,000 or less do. Similarly, when it comes to education, 82% of those with postgraduate degrees are invested in stocks, compared to just 41% of those who have only completed high school or less.

Some less discouraging statistics on stock ownership versus non-ownership, however, include:

Age: age plays a significant role, as expected. As people get older, the likelihood of them owning stocks increases naturally.

Marital status: marital status also seems to have an impact. Around 74% of married individuals own stocks, whereas only about 48% of unmarried individuals do.

According to the Efficient Market Hypothesis (EMH), stock prices reflect all available information. Therefore, it could be suggesting that the increasing participation in stock ownership could signify a widespread recognition of investment opportunities among the populace.

However, viewed through this lens, the disparity in stock market participation between low-earning demographics and their high-earning counterparts could also signal underlying wealth inequality. In other words, the limited engagement of lower-income groups in the stock market compared to their affluent counterparts may reflect broader socioeconomic disparities, wherein access to financial resources and opportunities remains unevenly distributed.

Of course, that’s not the only way to look at it.

Nathan Fernsby, an analyst at Investmentals, pointed out, “It’s noteworthy that stocks, by and large, do not pay dividends.” He emphasized, “This implies that the rising involvement in stock ownership may not always result in tangible financial returns for a considerable segment of the population. Instead, it could indicate speculative enthusiasm mostly influenced by commercial market dynamics rather than a comprehensive grasp of investment fundamentals.”

In essence, fluctuations in stock ownership among Americans are overshadowed by broader issues of wealth, income, and racial inequality. These disparities directly correlate with specific demographics experiencing higher or lower levels of stock ownership, as access to wealth and income opportunities significantly impacts individuals’ ability to invest in stocks.