Wall Street lore has it that Joseph P. Kennedy—father to JFK and RFK—exited the market when the kid who shined his shoes started offering stock tips. When everyone is participating in the stock market, the anecdote suggests, things are probably overheating. But what does it mean when participation slips below accustomed levels?

In a Gallup survey of just over 1,000 American adults conducted in early April, 54% responded "yes" to the question, "Do you, personally, or jointly with a spouse, have any money invested in the stock market right now—either in an individual stock, a stock mutual fund, or in a self-directed 401-K (sic) or IRA?" 45% answered "no," while 2% had "no opinion," presumably meaning they didn't know or didn't want to say.

In a blog post, Gallup Senior Editor Jeffrey Jones wrote that this result matches the average for the post-crisis period of 2009 to 2017, which is down 8 percentage points from the 2001 – 2008 average of 62%. 

Crisis Fatigue?

Gallup has tracked the share of Americans owning stocks since 1998. The peak came in the last days of June 2002, when 67% said they owned stocks and 33% said they didn't (the lack of "no opinions" may be telling).

The dot-com bust was already well underway at the time. Having peaked above 1500, the S&P 500 was passing through the 900s when the survey was conducted, on its way to an October 2002 bottom in the upper 700s. Perhaps due to morbid curiosity, Gallup conducted seven polls on stock ownership in 2002, four of them in July. The share of stock-owners whipsawed between the all-time high of 67% and 56% not quite a month later. 

Much of this volatility is likely due to margins of error, but some of it probably reflects a national reassessment of regular people's relationship with stocks in light of wealth-gobbling market volatility. The share had climbed back to 65% by April 2007, just before the mortgage bubble started to wobble, but it has not recovered since the financial crisis. The S&P's sinister bottom—666 and change—on March 6 did not signal the lowest ebb of American stock market participation, which fell back below its April 2009 reading of 57% in 2012 and stayed there. (For more, see also: 3 Reason To Not Sell After a Market Downturn.)

The dot-com crash and mortgage crisis, coming in relatively quick succession, may have turned Americans off to stocks. LPL Financial senior market strategist Ryan Detrick put it in a blog post, "we are a long way away from seeing Uber drivers giving stock tips."

Feeding Inequality?

If that's the case, Americans picked the wrong time to stop betting on the market. Interest rates have not seen the upper edge of 1% since 2008, so putting money away in a savings account, CD or the like has yielded nothing or less (taking inflation into account). Rich individuals have been taking advantage of the cheap money, however, often as not plowing it into stocks. Big firms have followed suit, taking on debt to buy back their own shares. The S&P has more than tripled since its March 2009 low. (For more, see also: Goldman Sachs Says Buybacks Are No Longer a Sure Winner.)

Gallup's polling shows that the wealthy have hardly missed out. Among households making less than $30,000 a year, 27% invested in stocks from 2001 to 2008; from 2009 to 2017 the share was 21%. The decline was also significant in the $30,000 to $74,999 range (67% to 54%) and the $75,000 to $99,999 range (85% to 75%), but among those making over $100,000, participation crept up one point, from 88% to 89%. 

During the Democratic primaries, Bernie Sanders was fond of citing Emmanuel Saez, who calculated that the top 1% of earners had captured 58% of the wealth created from 2009 to 2014. Non-wealthy people's flagging appetite for stock market risk is almost certainly a result of the financial pounding they took in 2008 and 2009, but combined with the last eight years' raging bull market, the reluctance has helped pry the wealth gap even wider. (For more, see also: A Brief History of Income Inequality in the United States.)

We may not have seen the end of this vicious cycle. Of all age cohorts, those aged 18 to 29 saw the biggest drop in market participation from 2001 – 2008 to 2000 – 2017: 11 percentage points, to just 31%. Those without a college education also saw a steeper drop than the national average: 10 points to 43%.

Want to learn how to invest?

Get a free 10 week email series that will teach you how to start investing.

Delivered twice a week, straight to your inbox.