Coronavirus Alters Millennial Spending, but not Thesis for This ETF

The coronavirus pandemic is altering how millennials spend, but not the thesis underpinning the Principal Millennials Index ETF (Nasdaq: GENY).

GENY tracks the Nasdaq Global Millennial Opportunity Index. This index seeks to capture the global spending and lifestyle activities of the largest generation ever, offering exposure to brand name companies specializing in social media, digital media, technology, healthy lifestyles, travel, and leisure. The companies will evolve over time as the spending patterns of millennials change as they age.

Millennials are “already cutting back on spending in preparation for a coronavirus-inflicted recession, and they’re taking to shopping online in order to avoid going out in public. For the same reasons, they’re also using delivery apps more than usual,” reports Business Insider.

The millennial generation is classified as U.S. citizens born approximately between 1980 and 2000. Millennials account for one-quarter of the nation’s population and are positioned to become a strong part of the workforce within the next decade. Older millennials are now entering prime earnings years, a point to consider as the U.S. economy starts the gradual reopening process.

GENY in Rally Mode

GENY is higher by more than 13% over the past month and is up almost 44% off its 52-week low. Importantly, the fund is levered to the online shopping boom.

Integral parts of the millennial-driven are shopping and entertainment consumption trends. Shopping and consumer trends are changing as more buyers rely on the convenience of online retailers to quickly and easily meet their discretionary needs. As the retail landscape changes, investors can also capitalize on the trend through ETFs that target the e-commerce segment.

“Millennials are also cutting back on in-person shopping trips — 39% said they’re shopping less frequently in stores, compared to 30% of overall respondents,” according to Businesses Insider. “And 30% said they’re shopping more frequently online instead, compared to 21% of respondents across all age ranges. That includes online grocery shopping, which has seen an uptick in demand thanks to coronavirus.”

As the population ages, the changing of the guard into luxury goods will see more millennial buyers. Bain & Company is forecasting that over 50% of millennials will be lux goods’ primary consumers in the next five years.

“The latest luxury report from consulting firm Bain & Company shows that millennials around the globe will consume more than half of all luxury production by 2025, and the wealthy middle class will be the main force behind that consumption,” a Jing Daily article said. “But that segment will remain cautious about luxury spending, putting more emphasis on brand values and shopping experiences. This change in consumer mindset occurred before COVID-19, but the pandemic has amplified the shift. Therefore, overseas brands that are struggling in the Chinese market must pay attention to these changes and the social dynamics surrounding them.”

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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.