Stock ownership: Who benefits?

The market is at an all time high, but stock ownership is wildly unequal

Published September 19, 2013 12:42PM (EDT)

This article originally appeared at The Globalist.

TheGlobalistWith the major stock market indexes at or near their all-time highs, stock investing seems to be coming back into fashion in the United States. While the job market is still far from a full recovery, at least stock prices are giving Americans reason to cheer. We wonder: What percentage of Americans actually owns any stock?

D. 80%

A.   35% is not correct.

More than 35% of all Americans own at least some stock, including that in retirement accounts or mutual funds. However, stock ownership is distributed quite unevenly throughout American society.

According to economist Edward N. Wolff at New York University, the wealthiest 1% of all Americans owned 35% of all the stock owned by U.S. households in 2010, a percentage that, due to recent market developments, is likely to have increased to as much as 38% today.

As of 2010, the richest 5% of U.S. households owned about two-thirds of all outstanding stock, a number that is likely as high as 70% today.

B.   47% is correct.

47% of all American own any stock at all — with an emphasis on "any." Coincidentally, that is the very same number cited by 2012 Republican presidential candidate Mitt Romney as the percentage of Americans who pay no income tax.

That fewer than half of U.S. households own any stock at all shows that the ambition of the Reagan and Clinton administrations to turn Americans into a nation of shareholders has fallen significantly short of the goal.

In addition, nearly 44% of Americans lack a financial safety net, defined as not having enough savings or other liquid assets to stay out of poverty for more than three months if they lose their income, according to the Corporation for Enterprise Development. And one-third of all Americans do not have any savings at all.

These numbers, along with a trend (which picked up speed in the 1980s) from employer-funded pensions to self-funded retirement plans such as 401(k) plans and IRAs, make plain that more than half of the country's population is entirely dependent on Social Security for their retirement.

C.   53% is not correct.

53% of Americans — or just over half the population — do not own any stock at all. This means that the current stock market rally can, even under the rosiest of circumstances, directly benefit less than half of the U.S. population.

However, since stock ownership is heavily concentrated among the wealthiest Americans, those who really benefit from a rising stock market are surprisingly small in number. As of 2010, 0nly one-third of U.S. households owned stock portfolios worth at least $5,000 — and only 20% of households owned shares worth more than $25,000.

Slightly over half (50.3%, to be exact) of all stock is owned by U.S. households that have annual incomes of more than $250,000 — and over 75% is owned by households that earn more than $100,000 a year.

D.   80% is not correct.

The wealthiest 10% of all Americans own 81% of all shares of stock owned by U.S. households (as of 2010). This underscores just how concentrated financial wealth is in the United States.

Stock ownership falls precipitously after this top strata. The bottom 90% of U.S. households own 19% of the stock traded on U.S. markets — and the bottom 80% own less than half of that (8.4%). The bottom 60% of U.S. households own a mere 2.5% of outstanding shares.

By Stephan Richter

Stephan Richter is the publisher and editor-in-chief of The Globalist, the daily online magazine, and a columnist in newspapers around the world. He is also the presenter of the Marketplace Globalist Quiz, which is aired on public radio stations all across the United States. In addition, Mr. Richter is a keynote speaker at international conferences -- and the author of the 1992 book, “Clinton: What Europe and the United States Can Expect.” Follow him on Twitter @theglobalist.

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