Our Growing Stake in the Stock Market

May 25, 2022 | Julia Sheehan, Research Associate

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.