How the Pandemic Increased Our Stock Market Wealth

According to Axios, the pandemic made Americans richer. By buying the dip, holding, and then buying more, households boosted their financial wealth by 38%:

Stock Market Wealth

Further explaining the pop in wealth, in a just-released report, JPMorganChase focused on the risk that comes from the entire market and individual securities.

They concluded:

1. Retail investors were willing to make riskier investments.
2. Bookended by less risk, investors’ risk accelerated during 2020 and 2021.
3. Looking more closely, we see women and older investors willing to accept less risk while younger men took more.

Providing insight, the JPMorganChase report cited two sources of risk. They looked at risk that results from individual trading and also from movements in the entire market:

Meanwhile, whether it’s poverty vulnerability, less wealth, or longer lifespans, women have reasons to be more risk averse than men. In addition, below, you can see how age affects acceptance of risk. Like women, baby boomers and the silent generation displayed results aligned with markets (middle) rather than individual trading (left side):

Although not explicitly stated, JPMorganChase tied risk to stock market wealth. But then, they also emphasized, individuals should be aware of their risk tolerance.

Our Bottom Line: Financial Intermediaries

Financial institutions play a hidden role in our everyday lives. Called intermediaries by economists, they link the people with money to those who need it. They include the stock markets that are a place and a process through which companies can connect to investors. Similarly, banks eliminate the need to find an individual who will pay for your house, your car, or your new factory. Banks are one of the go-to places for storing your money, paying your bills, and funding your business ventures.

Financial intermediaries have been compared to a beating heart. Like a heart keeps nutrient-laden blood flowing around our bodies, banks, stock markets, and other similar entities and institutions pump money around our economy. Whether talking about a healthy body or a healthy economy, a heartbeat and a financial intermediary are crucial.

My sources and more: Thanks to my Axios email for alerting me to the new JP Morgan report.

Please note that parts of our “Bottom Line” were in a previous econlife post.