U.S. stock ownership is at its highest level in 15 years.
A new Gallup poll out this week found 61% of US adults own stock either in an individual stock, a stock mutual fund, or in a self-directed 401(k) or IRA, up from 58% last year. This is the first time it has been at that magnitude since 2008 when the Great Recession was kicking in.
Stock ownership rates are back to those levels for most key demographic groups, except for US adults aged 65 and older, who are more likely to own stocks now than senior citizens prior to the Great Recession (2001 through 2007).
The biggest takeaway is that despite a major stock correction last year — all three of the major U.S. stock indexes recorded their worst year since 2008 — Americans did not abandon their stock holdings, a reversal from the response to the Great Financial Crisis.
“My overarching conclusion about why equity ownership is relatively high is that the ‘there is no alternative’ principle was alive and well, until very recently,” Christine Benz, Morningstar's director of personal finance and retirement, told Yahoo Finance.
In 2008 when the Dow was down 33.84%, people fled stocks. Their return to the fold has been incremental.
Stock ownership fell during the time span between December 2007 and June 2009 — the start and end dates for the Great Recession — and stayed depressed for more than a decade, including lows of 52% in 2013 and 2016, according to the findings.
Gallup has asked Americans whether they own stock since 1998 as part of its annual Economy and Personal Finance survey. The results of this year’s poll are based on telephone interviews conducted April 3-25, with 1,013 adults.
“The steep drop in stock values that occurred during the Great Recession and financial crisis may have deterred new investors from entering the stock market and caused others to take their money out of stocks and put it elsewhere,” Gallup Senior Editor Jeffrey Jones said.
Another reason stock ownership may be inching up is because employment has remained high despite the sinking stock market. The unemployment rate was a low 3.4% in April and has not topped 3.7% in the past year.
Employment, in turn, spurs stock ownership for many workers through retirement plan contributions. Nearly 7 in 10 (69%) of private industry workers had access to employer-provided retirement plans in March 2022, according to the most recent data from the Bureau of Labor Statistics.
And more than half (52%) percent chose to participate in a retirement plan. Among state and local government workers, nearly all (92%) had access to a retirement plan and more than 8 in 10 (82%) chose to participate.
Conversely, there were major layoffs during the Great Recession. In the two-year stretch starting in December 2007, the unemployment rate jumped sharply from about 5% to 10%, according to the U.S. Bureau of Labor Statistics data. In late 2009, more than 15 million people were unemployed.
Another explanation for the robust stock ownership now may be that interest rates have been so low for fixed-income investments that there was no alternative — even a safe investment — that brought in sufficient returns. For the past few years, for example, average rates on CDs were under 1%.
“Although 2022 was a bum year for stock and bond investors, investors expect volatility and periodic losses from stocks; they don't expect it from bonds,” Benz added. “More important, the U.S. stock market has still returned more than 11% over the past decade, ahead of its long-run return.”
That may help to explain why 63% of Americans aged 65 and older today own stocks, up from 53% of those the same age in previous years, according to the Gallup data. Since 2001, more than 60% of baby boomers have held stock, while ownership among the older Silent Generation has been in the mid-to-low 50% range.
“Baby boomers heading into retirement have had a wonderful experience owning stocks, not just for the past 10 to 15 years but in the 1980s and 1990s as well,” Benz said. “Anecdotally, it's very difficult to convince older adults to de-risk their portfolios as retirement approaches. Suggesting that they lighten up on stocks is like asking them to part with their prized possessions.”
Older Americans are now similar to those in the next two age groups, with 67% percent of those aged 30 to 49 owning stock and 66% of those aged 50 to 64 do.
Younger people are less likely to invest in stocks — only 41% reported stock ownership, but that may be ramping up. At Fidelity, for example, roughly 4 in 10 of the new clients who opened accounts in the last few quarters were between the ages of 18 and 35.
“More people understand and take a long-term view that stocks tend to outperform alternative investment products such as CDs for returns,” Barb Pietrangelo, a certified financial planner with Prudential based in Ada, Michigan, told Yahoo Finance. “Additionally, with greater life expectancy rates, retirees may now have a 15- to 25-year window to invest, enhancing their financial security for longer.”
Stock ownership also correlates most strongly with household income, the poll showed.
More than eight in 10 Americans with an annual household income of $75,000 or more own stock, including 80% of those with an income between $75,000 and $99,999 and 84% of those with an income of $100,000 or more. About half of Americans in households earning between $30,000 and $74,999 own stock (51%), as do roughly one in four of those earning less than $30,000 (24%).
That finding really drives home the point that equities are mainly a vehicle to grow wealth among those already earning more. Married and employed Americans are more likely to own stock than their unmarried and non-working counterparts, likely because of income differences between those groups, Jones added.
“That's been the story for time eternal,” Benz said. “When people have more funds at their disposal, they're more comfortable taking risks with that money.”
Kerry is a Senior Reporter and Columnist at Yahoo Finance. She is a workplace futurist, a career and retirement strategist and the author of 14 books, including "In Control at 50+: How to Succeed in The New Work of Work" and "Never Too Old To Get Rich." Follow her on Twitter @kerryhannon.
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