Final answer:
By the late 1920s, 10% of Americans owned stock due to the era's apparent prosperity, the availability of new consumer goods fueling corporate growth, and the ability to buy stocks on margin despite widespread poor income distribution and limited savings among the general public.
Step-by-step explanation:
By the late 1920s, approximately 10% of American households held stock investments, a figure influenced by several economic and social factors of the era. The prosperity of the 1920s and the popular belief in continual economic growth enticed a broader segment of the population, including many middle-class Americans, to invest in the stock market. Companies had been producing new consumer goods like electric ovens, washing machines, and radios, creating an impression of significant corporate profitability and future growth. Despite the fact that many Americans had little to no savings, the innovative practice of buying stocks on margin—borrowing money to make stock purchases—allowed even those with limited capital to speculate in the market.
The stock market's meteoric rise created a sense of confidence and the illusion of easy wealth, which led to an increase in individual investors. This period saw a proliferation of investment advice and brokerage services aimed at the general public, further increasing stock ownership among Americans. Unfortunately, this speculative bubble, combined with poor income distribution and limited new buyers entering the market, set the stage for the devastating stock market crash of 1929, which precipitated the Great Depression.