United States Household Equity Holdings

Sharing is Caring!

by gorillaz0e

Graph of this issue: pbs.twimg.com/media/DpPfBzeWsAYAwaJ.jpg

US Households have been holding a very high proportion of their wealth in equities — a level only once seen in 1968 and for several quarters in the late 1990s.

Such a high exposure has historically been associated with very disappointing subsequent 10-year total returns. Those of you who are traders shouldn’t be bothered by this, however, the more passive longer term buy-and-hold investor definitely should.

See also  CDC monitoring outbreak of Monkeypox...

With a historical correlation of over 90% since 1951, the subsequent 10-year returns tend to match household equity exposure rather well. Firstly, it goes to show that March 2009 was a fantastic buying opportunity pricing future returns @ 17% per annum.

Secondly, buying US stocks during the EU debt crisis of 2011 could produce a 12% compound return for the next 10 years. However, looking at today’s household exposure, a buy-and-hold investor entering the market might be in for a major disappointment!

See also  'Welcome to the United Pingdom': Quarantine chaos forces Iceland to CLOSE shops, and trains and food supplies are hit

Is it simply human nature to sell during crashes (2008) even though it is not the best decision?

What do you think is a good long term percentage, for households, to hold stocks? 20% ?


Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.