U.S. households to keep buying stocks this year, Goldman Sachs says

Investing.com -- U.S. households are expected to remain major buyers of equities in 2025, according to a note from Goldman Sachs, which estimates they will purchase $425 billion in stocks this year, second only to corporates at $675 billion.

“The resilience of household demand for equities is vital,” the analysts said, noting that households “directly own 38% of the U.S. equity market and control an even larger share including indirect ownership through funds.” 

That demand is said to have persisted even as Goldman’s Sentiment Indicator “registers -1.2 this week, remaining in negative territory despite a 21% rally in the S&P 500 from its April trough.”

Retail trading activity also remains robust, according to the bank. 

“Goldman Sachs trading desk estimates of flows from retail trading activity suggests close to $20 billion of net buying during the past three months,” the note said.

Goldman attributes this sustained buying to a favourable macro backdrop. “The typical macro drivers of equity flows suggest households will keep buying this year,” with outflows generally linked to “weakening household balance sheets, rising unemployment, and increasing interest rates,” none of which are dominant now.

The bank added that the equity exposure of U.S. households has reached historic levels. 

“Households allocate 49% of their total financial assets to equities, the highest level on record,” slightly surpassing the previous peak in 2000. In contrast, households in Japan and the Euro Area allocate only 13% and 10%, respectively.

Retirement savings continue to play a key role. “We estimate contributions to 401(k) plans drive roughly $500 billion of annual equity demand,” Goldman said, noting the average equity allocation in those plans has increased from 66% in 2013 to 71% in 2022.