Stocks in the Household Portfolio: A Look Back at the 1990s

The 1990s were remarkably good to U.S. stockholders. Stock returns for the decade averaged 16.1 percent per year, almost twice the historical average of 8.7 percent. The decade began modestly enough, yielding a 5.9 percent annual return to equity from 1990 to 1995, but it f inished exceptionally strong, with an astonishing 26.3 percent average annual return from 1996 to 1999. As returns mounted over the decade, the household sector’s stock holdings grew from $2.6 trillion to $12.6 trillion, and the composition of household assets shifted dramatically toward stocks. According to the Federal Reserve’s Flow of Funds Accounts, in 1990 stocks made up 13 percent of the household sector’s “portfolio”— the sector’s holdings of equity, real estate, transaction accounts, and other assets. By the end of 1999, stocks’ share had swelled to 33 percent, with much of the gain coming at the expense of real estate.