Why Good News For Millennials Is Bad News For The Market

There is an interesting development that has begun of late to get attention in the investment world as it relates to long-term American consumption trends.

Grizzle.com's Chris Woods explains in his latest notes that 'millennials' - defined as people aged between 17 and 35 (or born from 1982 to 2000) - are now larger (85 million) than the baby boomers (73.8 million)- defined as those born between 1946 and 1964 - according to the U.S. Census Bureau’s population estimates.

This is good news for some, and bad news for others.

As Woods notes, the good news is that the growth of millennials may raise the potential for an inflection point in the relatively weak consumption trend, which has been a feature of the American economy since the 2008 financial crisis as savings rates have risen.

Thanks to a sharp decline in the U.S. homeownership rate, a decline which by the way has now seemingly reversed.

The sharp decline in the U.S. labour participation rate of young people.

Real median household income for older millennials defined as aged 25 to 34 has turned higher.

And while they do carry a lot of debt, Woods argue that the student loan trend is not quite as disastrous as the gross number would suggest, namely US$1.36 trillion with a formal delinquency rate of 11.2%. The overall situation is not so grim because millennials otherwise do not carry much debt, if any, because no one would lend to them after the global financial crisis.

Clearly demographics drive long-term trends. So, Woods concludes, these are potentially huge developments in what is for now still the world’s largest economy.

And here is the bad news (if he's right)...

If U.S. growth really does recover in the manner the cyclical optimists are now expecting, by which is meant 3-4% growth compared with the average annualized U.S. real GDP growth of 2.2% since mid-2009, it will not be positive for financial assets because there will be a massive monetary tightening scare triggered by increased inflation concerns.

Read more here...

 

Comments

tgatliff Wed, 02/07/2018 - 20:16 Permalink

Right now, you must have money to make money, which millennials don't have.  Best thing for any millennial is to blow the current rigged fiat system up and start over with something that is actually fundamentals based.

 

Yen Cross Wed, 02/07/2018 - 20:17 Permalink

  Give me a break?!?!   The Millenials have so much disposable income to play with?

  Margin exposure is at ATH, and these kids know nothing about diversification.

  Lest we not forget the ATH student and consumer debt? 

  Thanks Chairsatan and Ole Yeller, for the wasteland you've created.

  Thanks for the down-vote Millenial ZIRPtard/

Mazzy Wed, 02/07/2018 - 20:25 Permalink

Youngest 1/3rd of "Millennials" are Conservative.  Gen Z is going to be Fascist....and that's not a terrible thing.

The liberal media does not want you to know that though.  Almost all of the bullshit happening at universities is NOT student led/driven.  Most reject all that crap, but unfortunately still silently play along....that tide will change.

 

An Shrubbery Thu, 02/08/2018 - 05:14 Permalink

It's funny how true these generational divides really are. I'm one of the last boomers, and I look around me at work, and all the really competent people are my age or older. There are just a few, very few younger guys who even try. And all the older guys are retiring, or just leaving in disgust. And to add insult to injury, MY retirement age is 67.5. All the other boomers get to retire at 65. I can't wait until my house is paid off in a few years, and I can go all John Galt on these losers.

iLLivaniLLi19 An Shrubbery Thu, 02/08/2018 - 09:05 Permalink

You're describing a symptom of socialism getting progressively worse encapsulated in the Russian saying; "they pretend to pay us, we pretend to work". I'm very productive in my personal life but do the bare minimum at work because there is no potential for meritocratic raises or promotions and I'm a cis white male. Even the prospect of a raise does little to incentivize me as I'm intelligent enough to realize that 40% of every more dollar I earn goes straight to the feds. And yet I've listened to you Boomers harp on the merits of the progressive income tax my whole life while inequality explodes out of control.

 

And if you think "lazy" millennials are the problem just wait until you are relying on Generation Z Mexicans and Muslims to pay the retirement entitlements for privileged whites who will then be a minority of the population and generally not working. It's going to look a lot like slavery and make for some very unhappy campers.

In reply to by An Shrubbery