American Stock Ownership Nears All-Time Highs Amid Strong Investor Confidence

The proportion of American financial assets allocated to public equities has surged to near-record levels, approaching highs not seen since 2021. This trend reflects renewed investor confidence, underpinned by a robust U.S. economy and the superior historical performance of equities over the past several decades.

As of 2024, an estimated 41.6% of U.S. households' financial assets are tied to the stock market, according to data from the Federal Reserve.

This marks a significant shift in portfolio allocation, demonstrating a strong preference for equities as a primary vehicle for wealth accumulation.

The rise in stock ownership is detailed in a line chart tracking U.S. households' and non-profits' corporate equity holdings as a percentage of financial assets over time.

Americans’ Increasing Investment in Equities

The latest data highlights a clear upward trend in stock market participation among American households. In 2024, 41.6% of financial assets are held in equities, compared to 30.5% in 2020 and 26.3% in 2010. This growth is even more pronounced when contrasted with earlier decades, such as 1990, when only 14.5% of assets were invested in stocks.

As inflation remains elevated and consumer spending robust, a record 62% of Americans now own stocks, the highest level in 20 years. Stock ownership varies significantly by income, with 87% of upper-income households, 65% of middle-income households, and 25% of lower-income individuals participating in the market. The first quarter of 2024 alone saw a remarkable $3.8 trillion increase in the value of assets held in equities.

This surge in stock ownership echoes similar patterns observed during the internet bubble of the early 2000s, although the subsequent crash led to a sharp decline in equity holdings. In contrast, the share of assets in equities plummeted to just 9.4% in 1982, a period marked by a recession and soaring interest rates, which made government bonds a more attractive investment option.

Historical Performance Driving Equity Allocations

The preference for equities is largely driven by their historical performance. U.S. stocks have consistently outperformed nearly all other asset classes over the long term. Over the past decade, U.S. equities have delivered an average annual return of 12.3%, significantly outpacing real estate investment trusts (REITs) at 4% and investment-grade corporate bonds at 1.4%.

Even when compared to international markets, U.S. equities have delivered superior returns. Since 2014, European stocks have averaged 4.6% annualized returns, while emerging market equities have returned 3.3%.

In summary, the ongoing shift towards greater stock market participation reflects both a response to current economic conditions and a recognition of the long-term value that equities have historically provided. As Americans continue to allocate a larger share of their financial assets to stocks, this trend may well continue, shaping the future of wealth management and investment strategies in the U.S.