The Blubber

The proportion of U.S. equities held by Americans aged 55 and older has surged to around 80%, up from 60% two decades ago, according to a Rosenberg Research analysis of Federal Reserve data. Notably, those 70 and older now hold a striking 30% share of the stock market.

“With the stock market hitting new highs, there’s a hidden downside risk — and it’s grandma,” economist David Rosenberg wrote in a newsletter on Wednesday.

Why does this matter? The concern is that older investors, who typically have shorter time horizons, may be less able to withstand market volatility compared to younger investors. If markets stumble, these retirees might be quicker to exit stocks in favor of more stable assets like bonds or cash.

The S&P 500 recently reached record territory and is up 22% over the past year. But a sudden downturn could prompt a wave of selling among older investors looking to preserve capital for retirement, potentially amplifying market declines.

Back in 2019, Americans aged 55 and over owned about 75% of the stock market. A decade earlier, it was around 70%, and 20 years ago it was only 60%. This steady increase raises concerns about market stability.

“Retirees can’t afford to ride out a prolonged market slump,” Rosenberg wrote. “If a correction hits, selling by older investors could create a powerful downward spiral.”

As the share of market ownership by older Americans has risen, that of those aged 40 to 54 has declined. Currently, this group holds about 15% of equities, down from 20% ten years ago and about 30% in 1990.