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A record, but small
Citadel has data showing that the bottom half of US households now own more than $600 billion in equities and mutual funds, an all-time high. For a long time the complaint was that the stock market served mostly middle and upper income people, so new investors entering it look like good news.
The market's size
The whole US stock market is worth about $80 trillion, which puts that $600 billion at less than 1% of it. A rising market creates a wealth effect that works mostly on upper income Americans, who spend more as their holdings climb.
What drives spending
The economy right now runs largely on two things tied to AI: the capital spending on data centers and that stock market wealth effect. A market correction would pull spending by high net worth households down a bit.
Why does market wealth drive spending mostly at the top?
Stock ownership is heavily concentrated. The Federal Reserve's Distributional Financial Accounts show the top 10 percent of US households holding a large majority of corporate equities. Economists who study the wealth effect find that households spend a few cents of each additional dollar of stock wealth over a year. Since the largest holdings sit with the wealthiest households, rising prices change their spending the most.
Why do most households own so little stock?
For a typical household, a home is the largest asset. The Federal Reserve's 2022 Survey of Consumer Finances found that 58 percent of families held stocks directly or through funds and retirement accounts. The median value of those holdings was far smaller than the value of a typical family's home equity. Employer retirement plans such as 401(k) accounts are the main route into the market for middle-income families.
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