24 Feb Are Millennials Really Powering the Stock Market?
Twenty and thirtysomethings would apparently rather buy experiences than things, and that has some very definite implications for retailers – or as least that is one theory. As this article from Bloomberg Business suggests, the stock market tells the tale of what is happening very clearly, and will continue to do so as the millennials reach their peak earnings years. While I agree that equities related to ‘equities’ have more potential than many in the ‘goods’ category, I think it is a little more complicated than the millennial theory would suggest.
Millennials – the share of the population born between 1980 and 2000, more or less – are now a generation with economic power. The oldest of them are out of school and in the workforce, and their preferences are shaping the economy. Once upon a time that might have meant a big boost to furniture retailers or purveyors of any kind of home goods, or even to the clothing retailers who could be expected to outfit them for the workplace. If you look at the companies that have done the best post-financial crisis, however, it is clear that something has changed.
As the article notes, those stocks related to leisure and travel and dining have done better than have general retailers over the past few years. In fact, if you look at the U.S. and European indexes tacking the two kinds of industries industries, the outperformance of the ‘experience’ ones over the ‘goods’ ones as at the beginning of 2016 was the highest since at least 2011. The theory, which is plausible enough, is that Millennials would rather spend their money on tickets to a sporting event or music streaming than on a shirt from Banana Republic or wherever. And to be sure, these days things like music streaming and cell phone service have become something akin to ‘staples’ to younger consumers, which no doubt crowds out the money they have available to make other purchases. Twenty years ago, no young person had to have money in their budgets for texting plans. Now they do, and that can be expensive.
Where I have a problem is with the suggestion that the ‘experiences’ over ‘things’ trend is limited to, or even driven by, Millennials. After all, it is the Baby Boomers and Generation Xers who have houses full of stuff that they would like to pare back. Organization-guru Marie Kondos’ books (The Life Changing Magic of Tidying Up was the first) have become huge bestsellers because they are about getting rid of surplus things and decluttering homes and lives. That sentiment is consistent with choosing to buy a meal out rather than more cookware to fill the over-stuffed kitchen cabinets.
In actual fact, if I did think it was Millennials who were completely behind the gains in experience stocks, I would probably be more worried that things would turn around. After all, in their case it may well be that they are only putting off buying homes and filling them up with the things that go along with setting up house. In the case of older consumers, however, the closets are already stuffed. As long as that sentiment continues, the experience stocks may well continue to be the ones to watch.