One Key Demographic Is Warming to the Stock Market

Due in part to the expected multi-trillion dollar transfer of wealth from older generations to their heirs, millennials are one of the most pivotal investment demographics for advisors and issuers alike.

It appears as though millennials are again warming to equities in significant fashion following the March 2020 market swoon forced by the coronavirus pandemic.

“Millennials are also getting more comfortable with stock investing, but many continue harbor a strong aversion to risk,” says Nationwide’s Mark Hackett. “The wariness toward equities and market risk has deep roots for this generation, many of whom came of age or entered adulthood in the wake of the 2007-08 financial crisis. Now, the Millennial generation—72.1 million strong in 2019, making them the largest generational cohort in the U.S.—is living through another significant crisis in the coronavirus pandemic.”

Time is on the side of millennials, particularly the younger ones. In many cases, they can afford to take on risk and be more heavily allocated to equities.

“But as Millennials get older, they’re also changing in ways that are similar to Baby Boomers and Gen X investors at earlier ages,” adds Hackett. “As an example, in the months after the market decline in Q1 last year, Millennials saw the strongest rebound in net worth among older age cohorts. By Q4 of 2020, under 40 investors (predominantly Millennials) grew their net worth 17% compared with the previous year.”

Hackett also points to rising enthusiasm for riskier assets. That music to the ears of many advisors and financial services firms.

“We can also see growing enthusiasm for stock investing among younger investors by looking at recent trends in trading apps and social media,” he writes. “Online investing has exploded in recent years, driven in large part by the success of Robinhood, a mobile trading app with over 13 million users with an average age of 31. The rising popularity of mobile and online trading platforms coincided with the COVID-19 pandemic and multiple rounds of government stimulus, leading many taxpayers to direct their relief payments toward stock investments.  A Deutsche Bank survey earlier this year found younger investors were most likely to invest at least part of their stimulus checks in stocks. This behavior was also common among new investors with less than a year of investment experience.”

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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.