US Households and the Stock Market
Currently, there aren’t any viable alternatives to the stock market for US households.
Although Tina’s stock trading activity seemed to decrease in recent years due to rising interest rates, it appears that interest has reignited. According to analysts from Goldman Sachs, this is particularly evident in US retirement accounts like 401(k)s.
The bank indicated a surge in stock demand within these retirement accounts, pushing the total allocation of 401(k) stocks to US equities up to $8.9 trillion in 2024. To give you a sense of the trend, 71% of 401(k) assets were invested in stocks in 2022, which is an increase from 66% back in 2013. Among younger account holders, particularly those in their 20s, the figure rises significantly—with the average investor placing 90% of their portfolio in stocks.
Interestingly, retailers have also shown a considerable appetite for stocks, netting around $20 billion in equities over the past three months, as per Goldman’s trading desk estimates.
Overall, the combined enthusiasm from retirement accounts and retail investors presents a robust backdrop for the stock market. Goldman points out that the demand among US households serves as a crucial support for market stability.
In fact, US households have reached an all-time high in stock market participation, with their allocation now averaging 49%. Banks project that households are expected to purchase about $425 billion in stocks directly this year.
There are indications that what many are calling the “Tina Trade” is still in full swing, which is seen as a primary bullish influence on the market. A team of strategists led by David Costin noted in a recent memo that substantial household capital demand and high stock allocations continue to help maintain elevated stock valuations.
However, it’s important to consider that wealth concentration plays a role here. The top 10% of households own 87% of the total stock shares. So, it seems that the demand for stocks is not as broadly spread as one might think. Also, a smaller elite (the top 1%) has been a significant driver of stock market demand over the last three decades.
Looking ahead, Goldman Sachs predicts that the S&P 500 could climb to a record 6,500 in the next year, reflecting a potential 7% increase from its current standing.
Recently, Goldman updated its year-end target for the S&P 500 to 6,100, a revision from their earlier forecasts that accounted for trade tariffs. This comes as the outlook for the economy appears to be improving following recent negotiations.
