The U.S. stock market made headlines in 2020. Its performance under pandemic conditions took many market participants by surprise.
New players joined the market. A new generation of investors suddenly has access to cheap commissions as the brokerage industry in the United States changed dramatically. Nowadays, you do not need to own a full share of a stock, as the broker allows you to own only a fraction of it.
Moreover, robo-advisory services automate the investing process, making it even easier for the retail trader to join the market. However who owns U.S. stocks, and are there more investors that may join in the future?
A Detailed Look at U.S. Stock Ownership
A survey run by Gallup this year during the stock market rout at the height of the pandemic-driven dip reveals the structure of the U.S. investor base. Over half of the U.S. adults (i.e., 55%) own stocks, but 45% do not. Hence, there is a strong potential for attracting even more people to the stock market.
Unsurprisingly, people over fifty are more involved in the stock market than younger generations. However, if you check the date of the survey, it states March-April 2020. Many things have changed since then, especially the fractional share investing mentioned earlier. Fueled by the fiscal stimulus offered by the U.S. Congress, many preferred to invest the new money in the stock market – especially the new generation driven by TikTok advice-givers.
What is surprising is that 15% of the people with over $100,000 in income are not involved in the stock market. Usually, the stock market is responsible for the wealth effect – the more it rises, the more people feel rich, and they increase spending. We can assume that the 15% do not have any interest at all in the stock market and likely belong to an age group already invested in something else, like real estate or other alternative investments.
All in all, the study provides good insights into the investors’ base in the United States and shows plenty of potential ahead for the retail sector. Why is this important?
At some point in time during the recovery after the March meltdown, the retail crowd was credited with the strong bid behind the stock market. As such, while not investing a lot, the size of the retail crowd matters, and it can move the market the more people participate.