More Americans Than Ever Own Stocks

The share of Americans who own stocks has never been so high.

About 58% of U.S. households owned stocks in 2022, according to the Federal Reserve’s survey of consumer finances released this fall. That is up from 53% in 2019 and marks the highest household stock-ownership rate recorded in the triennial survey. The cohort includes families holding individual shares directly and those owning stocks indirectly through funds, retirement accounts or other managed accounts.

The data provide the most comprehensive snapshot yet of how the Covid-era explosion in investing has reshaped Americans’ personal finances. Stuck at home during the pandemic with extra cash, millions jumped into the stock market for the first time. The elimination of commission fees on stock trading across U.S. brokerages made investing cheaper than ever.

“It created a whole generation of investors,” said Anthony Denier, chief executive of mobile brokerage Webull U.S.

Most households own stocks through a retirement account, such as a 401(k), but more Americans in the past few years have invested in individual shares directly. Direct stock ownership increased to 21% of families in 2022 from 15% in 2019—the largest increase on record since the survey began in 1989.

As more households bought individual shares, those newer entrants invested with less money than longtime stockholders. The median value of households’ direct stockholdings nearly halved from 2019 to about $15,000 in 2022, adjusted for inflation.

When the stock market crashed in early 2020, Nick Luczak, then a sophomore at the University of Michigan, used the $57 in his checking account to open a brokerage account on Robinhood and buy whichever stocks he could afford. Once the pandemic forced him off campus to live with his parents, he began researching the market and buying more stocks.

“I said, ‘Well, I have all this spare time. There’s no reason at all I shouldn’t be trying to make the most money possible from this,’” Luczak said.

Luczak and his fraternity brothers started a group chat to discuss markets and stock picks. He said he made a profit investing in Amazon.com and watched his friends make, then lose, thousands of dollars trading meme stocks such as GameStop and AMC Entertainment Holdings in 2021. At one point, he considered becoming a day trader.

Now, Luczak, 24 years old, is focused on long-term investing. A salesman in Dallas, he is studying to become a certified financial planner.

Brokerages in recent years have made trading free and easy. Newer apps like Robinhood and Webull helped popularise zero-commission stock trading on smartphones. Charles Schwab, TD Ameritrade and E*Trade all eliminated commission fees for stocks at the end of 2019. Fidelity and Schwab introduced fractional stock trading in 2020, allowing individuals to buy and sell slivers of shares.

“It’s become more accessible,” said Ashley Feinstein Gerstley, a certified financial planner and founder of The Fiscal Femme. “We’ve been debunking in the last few years the myth that you have to be rich or work on Wall Street to invest.”

The share of households owning stocks increased across all income levels from 2019 to 2022. Upper-middle-income families recorded the biggest jump in stock ownership.

Over those three years, stocks climbed to new highs. The S&P 500 rose 16% in 2020 and 27% in 2021. Even after a 19% drop last year, the benchmark stock index notched gains over the three-year period. The S&P 500 is up 23% in 2023.

Stock-market gains and rising home prices helped boost household wealth. Households’ median net worth climbed 37% from 2019 to 2022, adjusted for inflation, the largest increase in the survey’s history. The median value of a U.S. household’s primary residence surged to $323,200 in 2022, surpassing levels from before the 2007 housing market crash.

Americans’ penchant for stocks is distinct. U.S. households held about 39% of their financial assets in equities in 2022, according to Organization for Economic Cooperation and Development data, a higher allocation than most other countries in the data set.

That appetite for stocks has been tested since the Fed began raising interest rates last year at the fastest clip since the 1980s and pledged to keep rates higher for longer. Investors have been flocking to assets with little risk such as money-market funds that are now offering some of the highest yields in years. Everyday investors, who rarely own bonds directly, are taking a second look at assets such as Treasurys and corporate bonds.

Fernando Soto, head of private banking in Chicago at Brown Brothers Harriman, said he has fielded more questions from clients about fixed-income investing and more requests from clients to buy bonds in 2023. In his personal portfolio, he increased his allocation to fixed-income this year.

“There’s a big shift,” Soto said. “This is the new normal.”

How has the higher rate environment shifted American household finances? The Fed consumer finance survey in 2025 will likely paint the fullest picture.

Wall Street’s hottest trade has gone ice cold.

For years, it paid off to buy stocks that were rising in price—and bet against struggling shares. The momentum trade was especially profitable this year, as investors piled into hot stocks including Micron Technology, Nvidia, Advanced Micro Devices and other artificial-intelligence darlings while wagering against those likely to be hurt by the embrace of AI.

The S&P 500 Momentum Index soared 44% in the second quarter, its best quarterly performance on record, and it surged 133% over the past five years, nearly double the broad market’s performance.

Mega funds and rookie investors alike piled into the trade, some using leverage and options contracts in an effort to amplify their returns, propelling the underlying shares higher.

“It is a self-fulfilling prophecy,” said Matthew Tym, managing director at Cantor Fitzgerald, of the trade.

Suddenly, the trade is a loser. The momentum index has tumbled more than 9% since July 1, lagging behind the S&P 500’s 2.8% gain. The index—which tracks stocks in the S&P 500 based on a “momentum score”—is on track for the biggest quarterly underperformance in 25 years. July was the second-worst month for the momentum trade in around 40 years, according to Bank of America estimates; the only month worse was April 2009, in the teeth of the global financial crisis.

Hedge funds that bought momentum shares while shorting low-momentum stocks suffered even more. At the same time, a basket of the most popular stocks held by hedge funds tracked by Goldman Sachs recorded its biggest one-month underperformance in July relative to the S&P 500 in more than 20 years, according to the bank’s analysts.

Momentum trading is based on a rather simple observation: Investments that go up tend to keep outperforming; those that underperform often remain laggards. This kind of trading might seem too simple a stock-picking strategy to work. Yet it often has.

“For decades, it didn’t take a lot of sophistication to run a momentum strategy and make a decent living at it,” says Agustin Lebron, senior researcher at EquiLibre, a trading firm.

Part of the reason: It takes a while for corporate and other information to spread to various investors, so they slowly build positions, producing buying momentum.

“A huge pension fund can’t flip around its positions in a day,” says Lebron. “Behavioral biases also account for some of the effect, as well—people tend to sell their winners too early and hold losers too long.”

Fans of the strategy point to the human tendency to extrapolate from past results—and chase investment returns—noting that momentum patterns have been evident in markets for decades, even centuries. They also say that some of the worst months for momentum strategies are during longer periods of outperformance.

Some have been doing the trade by buying the strongest investments in a sector while shorting the weakest; others lean in to rising markets or asset classes. Still others use a quantitative approach or turn to banks or others who sell ways to make distinct wagers on momentum as a “tradable factor” or a “thematic basket.”

The fans remain believers. “Any strategy has disappointing periods,” says Antti Ilmanen, global co-head of the portfolio solutions group at AQR Capital Management.

The surge in Moderna and other biotech stocks helped crush the momentum trade. These shares were among the most heavily shorted in recent years, but positive news on a cancer vaccine from Moderna and Merck sent those stocks flying, crushing some quant and other hedge funds. Moderna is up around 150% so far this month.

These traders had an especially rough day on Aug. 19, which Goldman Sachs told its clients was the worst day for “systematic long-short managers” in more than two years. About half of the losses were because of momentum trades, the bank said.

Some traders have begun to short, or bet against, the very stocks that propelled the momentum trade earlier this year. Net short positions in futures tied to the Nasdaq-100 index among speculators recently climbed to some of the highest levels of the past two decades, according to data from the Commodity Futures Trading Commission.

The about-face is a sign of how markets have become more treacherous for investors, even as indexes keep climbing. Part of the issue: the recent meltdown of Situational Awareness, a hedge fund that had piled into some of the most popular momentum shares, including chip stocks. After a period of market tumult, Nvidia shares rocketed almost 9% after its earnings, showing how quickly sentiment can shift.

Some investors say the run-up in share prices driving tech stocks higher reminds them at times of the dot-com frenzy decades ago.

Mike Ogborne, the founder of San Francisco-based Ogborne Capital Management, said he has grown more cautious on technology stocks and is keeping more of his portfolio in cash than he typically does.

And he is nervous about the surge in spending by technology giants and quarterly capital expenditures that keep rising.

“It is a little bit like Cinderella and the clock striking midnight. You don’t know when midnight is going to come around,” Ogborne said. “They don’t send a memo around telling you when the capex cycle is over.”

More Americans Than Ever Own Stocks

Pandemic, zero-commission trading ‘created a whole generation of investors’

Wall Street’s hottest momentum trade has reversed sharply, as former winners tumble and heavily shorted stocks surge.