A chart from Bloomberg examining US stock ownership shows that wealthy Americans dominate stock ownership. Yahoo Finance's Julie Hyman breaks down how income compares to stock ownership and explains what this means about consumer spending in today's Chart of the Day.
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This is a very important chart because it's ties back into consumer spending and has implications for the US economy. So let's get to it here. This chart coming to us via Bloomberg, it looks at US stock ownership by income percentile. So what you're seeing here in this sort of light gray, this is the top 1% of income earners in the United States and the share of the stock market that they own, which is quite significant. Add to that the next 19%. So together, these two are the top 20% and you see they own really the bulk, the vast bulk of stocks here in the United States with the remaining bit, sort of the remaining um percentage here of uh of the remaining 80% hold holds just a small sliver of stocks in the United States. Why is this important? Well, because we've seen stocks fall here. And so you hear a lot of talk about the wealth effect, that is as stocks go higher, the wealthy Americans feel wealthier and that constitutes a big chunk of folks here who do a lot of spending in the United States. According to a recent analysis by Moody's Analytics, in fact, the top earners in the United States, folks who own more earn more than $250,000 a year account for half of all US consumer spending. So if this cohort does not feel as confident and you see a decrease in that sort of wealth effect, that can have a real effect on spending. Just to put a fine point on this and to look at what we have seen from stocks here. We saw of course year to date the slump in stocks, but if you take it back over the past five years and you look at the increase in wealth that we saw really starting in 2020, even if you go back and look at the 10-year chart here to see that big boost from 2020 and beyond. Uh there is some analysis that shows that that increase in wealth and obviously doesn't just track the S&P 500, it tracks other assets as well, crypto, etc. Um that that was an enormous increase increase in wealth on the part of the highest earning Americans. And therefore, to go back to our chart of the day, um you know, their ownership of stocks increased. So in other words, Josh, there is a lot at stake if we see a resumption in declines in stocks because it can affect consumer spending, it can certainly affect consumer confidence and it has implications for that wealth effect.
