Record Highs for US Equities – A Breakdown of Corporate Ownership

US equities continue their bullish run as main indices posted new highs last week, but who owns the $70 trillion corporate equity market?

The coronavirus pandemic brought a lot of uncertainty. The stock market declined into bearish territory only to bounce back even faster.

Investors, it turns out, are not afraid of pouring their savings into the equity market. In fact, they borrowed the funds and then invested the proceeds. As such, the US equity market, the largest in the world, has reached $70 trillion as of the first quarter of 2021.

But who owns this market?

Who Owns the US Equity Market?

US households are the largest shareholders of equities. 38% of households are invested in the market, albeit their share has declined over the past decade.

By comparison, foreign investors’ interest has increased consistently since the end of the 90s. Nowadays, foreign investors own 16% of all US equities, and their share is growing. Pension and government retirement funds make up another 10%, while the rest belongs to business holdings, hedge funds and other investors.

Perhaps the most interesting segment besides the 38% household ownership is that of mutual funds, both active and passive. But who owns them?

A study by the Investment Company Institute revealed that 45.7% of all US households owned mutual funds. More precisely, close to 60 million households were invested in active or passive mutual funds.

A profile of the typical, mutual-fund owning head of household shows that they had $126,700 invested in four mutual funds. Moreover, the investor shares the investment decision-making with their spouse or partner and owns a traditional or Roth IRA.

In other words, the household’s ownership of US equities is far larger than the 38% stated in the first chart. Combined with mutual fund investments, US households hold more than half  of the $70 trillion equity market.

This means that any systemic risk to the financial markets poses a threat to the overall US economy. This gives a better indication of the difficult task facing the Fed when it comes to tapering.