The Blubber

80% of stocks held by Americans are held by those over the age of 55, up from 60% two decades ago, and an all time record.

The proportion of equities held by individuals at or near retirement age (55+) has increased to approximately 80%, up from 60% two decades ago, according to an analysis of Federal Reserve data by Rosenberg Research. Moreover, Americans aged 70 and older now possess an "astonishing" 30% share.

"As the stock market breaks fresh highs, a sinister downside risk is lurking in the shadows — your grandma," economist David Rosenberg remarked in a newsletter.

Earlier this month, the S&P 500 achieved a new record high, with a 22% increase over the past year. Should the stock market experience a downturn, older investors may opt to sell equities to transition to less volatile investments such as bonds or cash.

At the end of 2019, individuals aged 55 and over held a lower share of equities, around 75%. A decade ago, it was approximately 70%, and 20 years ago, it was only about 60%. This trend presents a potential concern for the market's health.

"Retirees don't have the luxury to buy and hold through a market downturn," Rosenberg wrote. "If a downturn does materialize, demographically induced selling is a force that could exacerbate the spiral powerfully."

The rationale is that Americans near or at retirement age are more inclined to sell stocks or even exit the market entirely if their portfolios start to decline, as they will want to ensure they have enough retirement funds. Such behavior could intensify a sell-off.

As the ownership share of older Americans has increased, there has been a decrease in the ownership share of equities by individuals aged 40 to 54. Currently, it stands at about 15%, down from 20% a decade ago and roughly 30% in 1990, according to the report.

However, it's important to note that individual investors are not the sole holders of stocks. Institutional investors actually own the majority of public companies' equities, according to Fed data. Therefore, while retirees wield significant influence in the stock market, and their behaviors are crucial to understand, they are not the only major players.