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Our Growing Stake in the Stock Market

May 25, 2022

Area chart showing U.S. household wealth tied to equities. Chart subtitle: The level of U.S. household wealth tied to equities is at an all-time high. Chart visual description: Y-axis shows Equities as a % of Household and Non-Profit Financial Assets, ranging from 0% to 45%. X-axis shows years in 2-year increments, frfom 1979 to 2021. Data is plotted in light orange. Chart data description: In 1979, where chart data begins, 12% of household financial assets were held in equities. That percentage consistently climbs across the years plotted, with a dip every few years. The first peak in 2000 hit 38%, before declining to 22% in 2003 in the wake of the Dot-Com Bubble, then climbed again to 32% in 2007 before declining sharply to 18% in 2009 in the wake of the Global Financial Crisis. Since 2009, it has continued to climb fairly steadily. Though it did dip in early 2020, from 36% in October 2019 to 30% by January 2020, it has only increased since then, to a current 41.9%. Chart source: Source: FRED, Federal Reserve Bank of St. Louis as of December 31, 2021. End chart description.

Equity markets have experienced heightened levels of volatility throughout 2022 with the S&P 500 down nearly 20% from its high in January. A host of macroeconomic factors — 40-year high inflation, supply chain disruptions, the war in Ukraine, and hawkish central bank policy — are stoking uncertainty in the markets and driving stocks lower. With the consumer at the center of the biggest unknown — whether the U.S. will dip into recession — the growing connection between individuals and the equity market is an increasingly important dynamic.

It’s generally accepted that the stock market is not the economy, though today the lines are more blurred. The portion of household financial assets held in equities has been steadily increasing, reaching an all-time high of 41.2% at the end of 2021. Individuals have an increasing stake in equity performance, with fluctuations in the stock market directly impacting consumer balance sheets and spending potential, and thus economic growth. This dynamic further complicates the job of the Federal Reserve as it looks to raise rates enough to combat heightened inflation without extinguishing growth. While no one has a crystal ball, continued market volatility seems likely. That said, for long-term investors, history has shown that markets are resilient and staying invested leads to the best outcomes; we encourage investors to remain disciplined.

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The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.