As stock market booms, Americans have more at stake than ever

Americans have a greater share of their resources in the stock market than ever before, driving a historic accumulation of wealth that also leaves more individual investors exposed to the market’s ups and downs.

That expansion comes as stocks march steadily upward in defiance of increasingly worrisome economic data. The S&P 500 index rose about 7 percent in the third quarter that ended Tuesday, led by artificial-intelligence-related investments that some believe are primed for a correction.

Data from the Federal Reserve Bank of St. Louis showed that households and nonprofits were investing about 45.4 percent of their assets in corporate equities as of the second quarter of 2025 - the highest exposure to stocks ever.

An estimated 62 percent of Americans own stock as of May, matching 2024 and the highest level since 2007, according to the polling firm Gallup. And Federal Reserve data analyzed by the Securities and Exchange Commission shows the median U.S. household had about $52,000 in stock holding as of 2022, compared with nearly $46,000 in 2019.

Analysts say there are myriad reasons for this trend line; trading apps such as Robinhood and Webull have made it easier to invest small amounts of money in companies and index funds. It also explains the rise in meme stocks - shares of a company that go viral by way of social media sites such as Reddit.

The expansion of 401(k) accounts, spurred by the Pension Protection Act of 2006, means more workers are automatically enrolled in retirement plans that include stocks and bonds. The stock surge has created an influx of millionaires, according to Fidelity Investments, one of the largest administrators of workplace retirement plans. Fidelity had 595,000 accounts with balances in excess of $1 million at the end of the second quarter, up nearly 20 percent year over year.

Personal finance experts also point to the role of emotions in setting investment trends. The spectacular stock market gains of 2020 and 2021 have also led to a sense of FOMO - fear of missing out - as people want to position themselves for the next rally, said Christine Benz, director of personal finance and retirement planning at Morningstar.

“We’ve also enjoyed a fairly strong economy for a decade-plus, and economic expansion tends to give households more leeway in their budgets to invest for the long term, and more confidence to do so,” Benz said.

Meanwhile, Wall Street looked past the looming government shutdown on Tuesday, with the S&P 500 closing out the last day of the third quarter with a 0.4 percent gain; the index is now up for 13.7 percent for the year. The Dow Jones Industrial Average - which set a record high Tuesday - has climbed more than 9 percent since the start of 2025, while the tech-heavy Nasdaq has soared 17.3 percent. And the Russell 2000 index of small-cap companies is up 9.3 percent for the year.

The third quarter has historically been “the most challenging quarter of the year,” notes CFRA chief investment strategist Sam Stovall, who closely tracks the stock market’s historic performance.

October, by comparison, has been associated with a number of volatile “shakeout events,” Stovall said, possibly because it coincides with the end of the fiscal year for many mutual funds, meaning fund managers often adjust their portfolios.

Historically, “there is more rain in September, but more wind in October,” Stovall said.

Wall Street’s gains overlay a mixed economic picture. Inflation ticked up to 2.9 percent in August to the fastest pace since January, fueling stagflation worries. Though unemployment remains relatively low, at 4.3 percent, U.S. employers created far fewer positions during much of 2024 and the early part of 2025 than previously reported, according to federal data released last month.

Analysts say the most recent market gains got a nudge from the Federal Reserve, which lowered its benchmark rate by a quarter-point on Sept. 17, citing a cooling labor market. That should mean lower borrowing costs for Americans looking to buy homes or wanting to start or grow businesses. Falling rates could help companies reduce debt or invest more in their operations.

But any development that affects the Fed’s plans - such as an unexpectedly high inflation reading or new tariffs - could spook the markets, said Michael Farr, an analyst with the D.C.-based Farr, Miller & Washington.

“What happens if tariff inflation shows up and the Fed says, ‘Wait a minute’? We’re already moving into the thin branches of risk, solely based on these price levels,” Farr said.

As a result, Farr said, investing in 2025 is “anything but a no-brainer,” because buying into the stock market means paying for stocks at near-record prices.

“Stock ownership means that you own a small piece of corporate America,” Farr said. “While you never want to bet against corporate America, you never want to pay the highest price anyone has ever paid.”

The market has been buoyed by continued enthusiasm around artificial intelligence, with big tech companies including Oracle, Palantir and Meta driving a significant share of the market’s gains. Investors could be at risk if the new technology fails to deliver returns that are commensurate with the hundreds of billions of dollars being spent on data centers, energy and other aspects of AI infrastructure. And some analysts believe AI stocks are overvalued, creating the risk of a bubble.

A recent order making it easier for everyday savers to invest retirement funds in alternative assets such as private equity, real estate and cryptocurrencies could further increase risks for investors, said Corey Frayer, of the nonprofit Consumer Federation of America.

Still, analysts cautioned that the most successful investors tend to keep a longtime horizon and avoid overreacting in the short term.

“The biggest risk is that, if we have a sell-off, these newer investors could cash out at the bottom,” said Wayne Wicker, president of McLean, Virginia-based Opal Capital. “Markets can go a lot further with rich valuations than most people expect.”

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