Chart of the Week: Who owns shares?

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Good morning. Households in different countries have vastly different exposure to public markets. Among our sample of developed economies, the US leads the pack, with 46 per cent of household financial assets held directly in listed equities and investment funds. Across the EU27, the average is 16 per cent. The Netherlands, birthplace of the modern stock market, does not even manage half the EU average, at just 6 per cent.

The reasons include tax policy, financial culture and, above all, pension system design. When pension entitlements are included, Australia and the Netherlands — both with large funded retirement systems — shoot up the ranking to above 50 per cent of household financial assets. By contrast, countries with more pay-as-you-go pension systems, such as France, Italy and Spain, see much smaller changes.

In the UK, low stock market participation has been a source of periodic hand-wringing. Attempts to foster a shareholding culture have not halted the slide towards historically low levels of direct stock ownership. This becomes an economic policy issue when too much household saving sits in cash and low-yield accounts rather than being channelled towards productive investment.

Policymakers also care because of the wealth effect. When households have a visible stake in market returns, rising valuations can make them feel richer and more willing to spend. The effect is likely stronger for directly held, liquid assets than for locked-up pension wealth, but broad market participation can still help support consumption. In a big stock market correction, of course, the wealth effect works in reverse.

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