The likelihood that investors are anticipating gains in the coming year has fallen to levels not seen since before the Great Recession of 2008.
Additionally, above $100,000, investors are as bullish on stock price gains as stockholders overall as macroeconomic headwinds remain unclear, according to the University of Michigan Consumer Survey.
What happened: The ownership of shares, including assets held directly as well as assets held Investment funds and retirement accounts, increased from 66% in 2018 to an average of 69% of all households in 2022, according to the report.
A key contributor to the high level of market participation is that inflation-adjusted returns on interest-bearing financial accounts remain negative, leading investors to prefer to buy ailing stocks.
Notably, the highest increase in market participation came from the bottom tier of households by income, as low-cost and fractional trading with online brokers such as e.g Robin Hood markets HOOD.
Households with larger holdings saw larger declines, as household stock portfolios across all quintiles declined between 19% and 34% since the fourth quarter of 2021, the study found Joanne HsuDirector of University Consumer Surveys.
Why it matters: The probability of stock price gains has fallen miserably since the start of the fourth quarter of 2021, when it hit 62% and is now less than 44%, its lowest level since 2012.
The last time a drop of this size and speed was observed in the data was just before the 2008 financial crisis, in the four quarters following the third quarter of 2007, the report said.
While this does not mean a financial crisis will materialise, it does signal that investors are unsure of the macroeconomic headwinds and more…
