The Chart of the Week is a weekly Visual Capitalist feature on Fridays.
Over the course of the year, U.S. markets have hit new all-time highs on multiple occasions. The most recent iteration of this trend is the “Trump Rally”, which has the S&P 500 up 2.8% since Election Day.
Alluvial Fund August 2020 Performance Update
Alluvial Fund performance update for the month ended August 31, 2020. Q2 2020 hedge fund letters, conferences and more Dear Partners and Colleagues, Alluvial Fund, LP returned 4.8% in August, compared to 7.2% for the S&P 500 and 5.6% for the Russell 2000. Year-to-date, Alluvial has returned 6.6% versus 9.7% for the S&P 500 and Read More
Fueled by expansionary monetary policy and the lowest interest rates in history, the bull market in U.S. equities is now the second-longest of all time. It’s hard to believe that almost eight years ago, the S&P 500 sat at a measly low of just 676.53 on March 9, 2009.
Rising Portfolios, Declining Participation
The stock market is proven to be the best way for investors to make returns over the long run, even through recessions and other catastrophic events.
This can be seen on the below map, showing portfolio value on a regional basis from 1989-2013:
This data, which comes from the Fed every three years, shows the mean value of stocks for families that have holdings in the market. The most recent national number is $294,300 for 2013, and we can safely assume that mean portfolio values are even higher today given the continuation of the bull market.
But does this mean that everyone has benefited from rising stock prices?
While the average value of stocks held by families has soared, there is an alarming countertrend: the percentage of families that actually own stocks has been shrinking since 2001:
One particularly interesting regional case is that of the Midwest. In the span of nine years (from 2004-2013) the percentage of families with stock ownership halved from 23.4% to 12.3%.
But this has also happened on a broader level.
The percentage of families nationwide with directly-owned stocks peaked at 21.3% in 2001 – and since then, the number has consistently declined all the way until 2013, when only 13.8% of families owned stocks.
What Does It Mean?
Despite steady market gains since 2009, fewer families are participating in the markets.
Is it that people don’t have enough disposable income anymore to invest? Or is this because families are still skeptical of the economy and market even years after the 2008 crisis?
Regardless of the reasons, stock market gains have gone predominantly to one group of people:
The 90-100% percentile income bracket – in other words, the people who make the most money – have had the value of their stocks triple in value since 1989.
A Slight Trend Reversal?
Though Fed numbers for this year won’t come out until late 2017, there is some evidence that stock ownership has started to increase again, even if it is just a tiny improvement. This recent Gallup poll shows 2014 and 2015 to have slightly higher numbers of people involved in the market, though it uses a different definition than the Federal Reserve for its figures.
So as the “Trump Rally” comes to a close, the question remains. Did enough Americans benefit from the most recent rise in stock prices, or did those returns go only to one group?
Article by Jeff Desjardins, Visual Capitalist