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.