Americans' investments in listed shares, close to a record

The share of financial assets invested by Americans (households and non-profit entities) in listed stocks is approaching record levels, just above the peak recorded in 2021, according to a visualcapitalist.com analysis, which points out that investor confidence, a strong (US) economy and the superior historical performance of the last decades encourages this type of investment.

In 2024, 41.6% of the financial assets of American households are related to the stock market, according to the cited source, which is based on data from the US central bank (Federal Reserve - Fed).

• Americans are investing more and more in stocks

The share of financial assets invested in the stock market by Americans, in each decade, looks like this (according to the figures from January 1, each year): 23.9% in 1960; 23.8% in 1970; 10.9% in 1980; 14.5% in 1990; 38.4% in 2000; 26.3% in 2010; 30.5% in 2020; 41.6% in 2024, according to Federal Reserve data.

As these numbers show, more and more Americans are investing a greater portion of their wealth in listed stocks during a time of high inflation and solid consumer spending.

Currently, 62% of Americans own shares (including unlisted companies), which is the highest level in the last 20 years. According to the source, 87% of high-income Americans own stocks, followed by 65% of middle-income Americans and 25% of lower-income people. In the first quarter of 2024 alone, the value of assets held by Americans on the stock market increased by $3.8 trillion compared to the previous quarter, according to the Fed.

Similarly, a significant portion of Americans invested in stocks during the dot-com bubble. This share of investors fell sharply after the dot-com crisis, in which shares of technology companies collapsed as investors were affected by risky investments. Often, these companies did not have earnings or viable business models, according to the cited source.

On the other hand, the share of assets held by Americans in stocks fell to 9.4% in 1982, a year in which ten-year Treasury bonds offered a record yield of 32.8%. For comparison, these returns exceeded the dynamics of the S&P 500 stock market index by 12.4%, against the background of rising interest rates. At the time, the US economy was marked by recession and high inflation, which led investors to turn to less risky assets.

• The dynamics of shares owned by Americans exceeded that of other assets

One of the reasons why American investors turned to shares is the historical performance, notes visualcapitalist.com.

Compared to almost every other asset class, US stocks have outperformed for decades. Looking back over the past ten years, US stocks have averaged an annual return of 12.3%, compared to 4% for real estate investment trusts (REITS) and 1.4% for corporate bonds with relatively low default risk.

Even beyond America's borders, domestic stocks posted higher returns. Since 2014, European shares have had annual returns of 4.6%, while emerging market shares have recorded an average return of 3.3%, concludes the quoted source.