The Impact Millennials May Have on the Stock Market

  By Matthew Jentner
Matthew Jentner

People worry that the Baby Boomers are dragging down the stock market as they enter retirement and become more risk adverse. According to Charles Schwab & Company, the spread between money flowing into conservative bond mutual funds and flowing out of riskier stock mutual funds is at its widest in history.

The Baby Boom generation born between 1946 and 1964 has dominated investment markets since the 1980s. They struggled for an economic start during the repeated recessions between 1973 and 1982 but then helped propel an 18-year bull market as they reached their peak earnings power in the 1990s.

Liz Ann Sonders, Chief Economist at Schwab, thinks the millennial generation born after 1980 could propel stock prices higher in the future. She says millennials make up a larger cohort of potential investors—80 million compared to 77 million Baby Boomers.

Millennials are struggling with weak job prospects as they try to establish careers and families. This is typical of early adult life and similar to the struggles Baby Boomers faced during 1973 to 1982. However, once millennials reach their 30s, they will have the capacity to save and invest, just as their parents did. And they are already having an impact: millennials are beginning to save and invest in stocks. They have more stocks in their 401(k) accounts than their counterparts did 10 years ago. Sonders also observes that, “Millennials tend to be optimists and are more willing to take risks relative to their parents’ generation.” Millennials already make up 29% of all entrepreneurs.

Perhaps, the future has promise. In spite of our economic challenges, there may be reason to hope for a stronger economy in the future after all. I urge you to take opportunities to encourage millennials to get financially educated and to vote for legislators who are fiscally prudent.

For more insight, listen to Jentner Wealth Management’s weekly podcast by clicking here. Or download Jentner’s newest white papers on The Four Cornerstones of Prudent Investing and The Active Versus Passive Investing Debate.