Individual investors in America own more stock than ever before. In April, stockholdings among U.S. households increased to 41% of their total financial assets. This is the highest increase on record, according to JPMorgan Chase & Co. and Federal Reserve data. Millions of new brokerage accounts were created in the past year. Many of these new investors where not just starting because they were bored during the pandemic. It seems they are around longer-term.
Charles Schwab’s survey revealed that 15% began trading the market in 2020. This boom has continued into 2021, with JMP Securities estimating that more than 7.8 million new retail clients entered the market in January to February of this year alone. The new investors are not just young people. Schwab found that the median age of these investors is 35. More than 50% of these new investors are millennials, 22% Gen X, 16% Gen Z and 11% baby boomers.
Financial advisors and money managers report that their clients have grown more comfortable holding stocks because of the powerful rally in the markets that has been witnessed over the past year. Recent impressive earnings reports from giant companies like Alphabet and Facebook have also contributed to a steadily rising market, drawing in even more investors. David Sadkin from Bel Air Investment Advisors confirmed that the share of money invested in the stock market has increased to about 65% from roughly 45% last year.
Financial Industry Regulatory Authority figures show that margin debt (money investors borrow to buy securities) was at a record $814 billion. This number is up 49% from one year earlier and is the fastest annual increase since 2007.
At present the individual investors feel immune against losing money. How long will this immunity last? This will be anyone’s guess.
Sven Franssen