The Stock Market Isn’t America

Did the recent 10% drop in the stock market bother you? Let me take a wild guess: it’s because you have money in stocks. No one likes seeing their net worth decline.

You might feel comforted that we’re all in this together. Don’t be… because we’re not. Roughly half of all American households don’t own stocks.

Hence, it’s a mistake to think the stock market’s health says much about the nation’s economic health. The nation is its people, and many had little to celebrate even before the stock market dropped.

Investors ignore that fact at their own peril.

Photo: Getty Images

Zero Exposure

So who does own stocks? It’s a surprisingly tricky question since we have so many ownership structures and pooled investment vehicles. You have to drill through the layers to find the ultimate owners.

The first surprise: A big slice of the US stock market isn’t American at all. Foreigners own about 35% of US stocks by value—and their ownership grew considerably over the last few decades.


Some of these foreign shareholders are wealthy individuals, others are corporations or investment funds. They own far more of our stock market than ordinary Americans do.

About half of US households have zero exposure to the stock market: no stocks, no mutual funds, no 401(k), no IRA, nothing.

According to research by New York University economist Edward Wolff, some 84% of the stocks owned by Americans belong to the wealthiest 10% of households.

Subtract that 10%, and subtract the 50% who own no stocks, the remaining 40% of Americans split about 15% of the stock market. For many, their investment is negligible—maybe a few hundred dollars in an old 401(k). Others have a big part of their net worth tied up in stocks. Maybe you’re in that group.

But a solid majority of the American population feels no direct impact from stock market performance.

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Before I go, I want to mention the current issue of Macro Growth & Income Alert because it sort of ties in with what I just talked about. In it, my colleague Robert Ross and I are ...

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