If you’re concerned that households, by far the largest owners of the US equity market by cohort, might sell their stocks, driving additional downside for equities, don’t be. Because the rich own all the stocks, and all the cash too, so if anything, households will probably be buyers, especially given rising cash allocations.
“Some investors worry that the combination of a higher cost of living, rising bond yields and poor trailing equity returns may force household capitulation in the equity market,” Goldman’s David Kostin wrote, in a new note. “At first glance, investor worries appear to be warranted,” he said, noting that generally speaking, peaks in equity allocations can be a harbinger of subpar returns over the ensuing 10 years.
For Goldman, though, the prospect of household equity selling isn’t “a primary concern,” or at least not right now. Kostin’s rationale was straightforward. Stocks, he wrote, are “overwhelmingly owned by the wealthiest cohort of Americans” and those Americans, by virtue of being wealthy, are “largely insulated from the impact of higher inflation.”.........
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