FORTUNE – As U.S. stocks soar to new highs, economists argue the rally makes people feel richer. And when they think they're wealthier, the theory is that they'll spend more on everything from homes to cars and clothing.
The problem with that idea is fewer and fewer Americans actually have any stake in stocks. Only about half, 52%, say they actually have money invested in equities -- the lowest level since 1998, according to a Gallup Poll released last week.
In recent years, overall stock ownership has declined. Between 1998 and 2008, Gallup found at least 60% of Americans reported they owned stock. That share fell in 2009 when the nation slipped into recession and saw the unemployment rate double. By 2012, stock ownership declined to 53%, as the unemployment rate remained elevated.
Among the hardest hit were 30-to-49-year-olds, as well as among middle-income Americans. To be sure, a steady stream of individual investors have returned to the stock market. They pumped more than $60 billion into mutual funds and ETFs that hold U.S. stocks – more than any full calendar year since 2004, according to research firm TrimTabs.
This comes as the Federal Reserve continues buying up billions of dollars worth of bonds each month, a move to stimulate the economy and get investors to take on more risks. But while stock prices soar, it may not be a big enough incentive to lure many more investors back to the market. Lydia Saad of Gallup notes that Americans' withdrawal from stocks may be correlated to high unemployment. So long as joblessness is a problem Americans may simply be unable to afford to invest in stocks. It could also be that investors still think the market is too risky after stocks nearly collapsed during the financial crisis.
In many ways, the same can be said for the nation's housing market. What's interesting is that stocks, and perhaps more so homes, are generally major sources of wealth for most Americans. Home prices have steadily risen since last year, but the share of Americans who own their homes is at its lowest level since 1995. This comes as large private investors buy up foreclosed homes at deep discounts, and as more people rent than buy.
All this says a lot about American wealth. True, higher home prices have returned many borrowers to positive equity; they now owe less on their mortgages than their homes are worth. This may give them the incentive to eventually sell and buy another home, but higher prices don't appear to have drawn many more buyers back to the market. The home ownership rate was 65% during the first three months of the year, down from 65.4% a year earlier and the lowest level since the third quarter of 1995, according to the Census Bureau's latest statistics released last month.
Like stock ownership, home ownership appears more a function of the health of the job market than any rise in prices. Which means so long as unemployment remains a problem, it puts the biggest sources of wealth farther from reach for most Americans.
Congressman proposes legislation to widen "ticks" for small-cap stocks.
FORTUNE -- Small-cap stocks are trapped in a cycle of arrested development. They are small, so they are ignored by analysts and market-makers. And because they are ignored by analysts and market-makers, they remain small.
But new legislation aims to change that, by allowing companies with market caps of less than $500 million to have their shares quoted as fractions rather than decimals. MOREDan Primack - May 13, 2013 4:16 PM ET
Legendary investor says stock market is in state of "euphoria," while economy is still in the dumps.
FORTUNE -- At least one notable investor thinks we may be in bubble trouble again.
Sam Zell on Thursday at the SALT hedge fund conference in Las Vegas said stocks are due for a fall. The legendary real estate investor thinks the market is out of touch with what is really going on in the MOREStephen Gandel, senior editor - May 10, 2013 9:02 AM ET
Equities are actually pricey, just when the "experts" are claiming they're cheap.
FORTUNE -- On Friday, May 3, the S&P 500 powered past 1600 for the first time in its history. The latest surge lifted the index's gains since the start of 2012 to 28.3% and fortified the prevailing view that this mighty market will roar far into the future.
What the optimists -- almost everyone you hear in the analyst community MOREShawn Tully, senior editor-at-large - May 7, 2013 5:00 AM ET
Nothing lasts forever, as investors in gold and J.C. Penney are being reminded.
FORTUNE – One of the wildest months the gold market has seen in years is coming to an end. The yellow metal has been recovering from its biggest drop in 30 years after prices plummeted 13% in mid-April. But while gold continues to rebound strongly, it's unlikely to return to its bull run anytime soon.
In fact, it may not MORENin-Hai Tseng, Writer - Apr 30, 2013 11:26 AM ET
While investors brace for a slower earnings season in the first quarter, they see a turnaround later this year.
FORTUNE -- The unofficial start of corporate earnings season kicked off Monday, with Alcoa (AA) announcing how it did during the start of the year. The world's largest aluminum maker reported better than expected earnings as demand from U.S. automakers increased, but revenue fell short of expectations.
Alcoa isn't going to be the MORENin-Hai Tseng, Writer - Apr 9, 2013 5:00 AM ET
Stocks have added $11.3 trillion in value, or 138%, since the market bottomed four years ago. That's an annual compounded return of more than 26%.
FORTUNE -- It's so much fun to own stocks these days, with the Dow Industrials and Wilshire 5000 index setting one new high after another, and the Standard & Poor's 500 within 1% of doing the same. Watching the value of your portfolio rise is such MOREAllan Sloan, senior editor-at-large - Mar 8, 2013 9:03 AM ET
The Oracle of Omaha still likes the market -- but he's hardly pounding the table.
FORTUNE -- In his annual letter to Berkshire Hathaway (BRKA) shareholders, released Friday afternoon, Buffett says he still believes U.S. stocks will "do well." He notes that he made his first stock purchase during the bleakest part of World War II, so even if things look not so great right now, you should end up doing fine MOREStephen Gandel, senior editor - Mar 1, 2013 4:03 PM ET
Why it's more important than ever to focus on the dividends and buybacks that companies return to shareholders.
FORTUNE -- Dividend-paying stocks have generated intense debate in recent years. Has the rising market made their prices too high and their yields too low -- or is a dividend-heavy portfolio still the best way to garner superior returns? For Chris Brightman, that discussion misses the point. Brightman is the head of investment MOREShawn Tully, senior editor-at-large - Feb 14, 2013 5:00 AM ET
The Delafield Fund thinks office-supply giant Staples can fend off a challenge from Amazon.
By Ryan Derousseau
FORTUNE -- Dennis Delafield and Vincent Sellecchia have run the Delafield Fund (DEFIX), which oversees $1.4 billion, since its launch in 1993. They seek turnarounds: undervalued companies with copious cash flow that are grappling with change (an acquisition, a troubled industry, or management) and that they think can rebound in a few years. Their MOREFeb 13, 2013 5:00 AM ET
|4 federal agencies to shut Friday|
|Mailbox comes to the iPad|
|Chrysler jabs Tesla over loan repayment|
|Stocks claw back from steep losses|
|McDonald's gives Charles Ramsey free food for a year|