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How Millennials Are Shifting the Stock Market

From their brand preferences to their investment styles, the generation overtaking Boomers’ spending power is setting up to seriously shake up the stock market…

Last year, we rang the (imaginary) opening session bell of the Millennial stock exchange to look at the generation’s power to lift, and shift, a brand’s value. Shortly thereafter, the Financial Post called Millennials “the next big investment trend,” citing their $1.3 trillion and growing direct spending power, and their massive influence on brands as reasons for investors to look at brands and industries that young consumers are most interested in. Now, we’re seeing more signs than ever that the generation overtaking Boomers in spending are set to seriously shake up the market.

Already, investors might have made a mint by following Millennials’ brand preferences and trends. Sales of “hipster” products have been soaring, with revenue of organic foods doubling between 2003 and 2014, specialty coffee shops tripling since 2002, and craft beer becoming 19% of the overall U.S. market. Big food brands have been attempting to keep up by creating more Millennial-friendly products and acquiring independent brands who already do. Their love of experiences has also been shifting the market. Unlike the generations before them, Millennials acquire experiences to shape their identities and create memories they can share, instead of spending money on luxury items like cars and designer bags. Travel and leisure-related stocks are feeling the effects: low-cost airlines stocks have risen sevenfold and Airbnb Inc.’s $25.5 billion valuation is more than Macy’s and Best Buy’s put together.

An exchange-traded fund based on Millennials’ preferences is even in the works. Though some have rolled their eyes at the concept, ETF provider Global X is opening the Global X Millennial Generation ETF, which will reportedly invest in “companies involved in social media, digital media, e-commerce, mobile technology, healthy lifestyles, travel, leisure, and the sharing economy.” In short, the tech, trends, and brands that Millennials are fueling. Though the Global X Millennial ETF was called the first of its kind when announced, it wasn’t long before another investment company took up the idea, and now both Global X and the Telsey Millennial Consumer ETF are awaiting approval from the U.S. Securities and Exchange Commission.

Millennials are also shifting the market as investors. Yes, some Milennials do invest, and their stock picks are not the same as Gen X and Boomers. A report from TD Ameritrade found that investors under 34-years-old “favored the stocks of their own time” with Apple as their top pick, and Facebook, Tesla, and Alibaba Group as other popular equity holdings. Older investors are more likely to choose stocks like GE, AT&T, and Exxon-Mobil. Younger investors also favor “passive management,” and tend to choose less volatile stocks. Unsurprisingly, their tech-reliance is also influencing their investments, and they’re using online wealth management tools and “robo-advisors,” while Boomers still rely on information from peers, traditional brokers, and financial advisors. Fintech startups like Robinhood are now giving them the tools to invest via mobile—and lowering the barrier to first-time investors. The stock-trading app features a minimalist design that its founder believes simplifies the trading process and makes it less intimidating. Robinhood is catering to consumers who have less than $1000 to invest, doesn’t charge for individual trades, and their average customer is 26-years-old.

If you still don’t believe Millennials will shake up the market, you should know that experts do think they’ll get over their stock phobia. A survey found that 75% of top investing professionals believe Americans in their 20s and 30s will begin to “take on more financial risk” as the realization that Social Security will not take care of them sets in. One advises, “Give them time—after all, they will all probably live to be 120 years old, thanks to modern medicine. What’s the rush?” But we don’t think you’ll have to wait too long to see their behaviors and preference shift stocks even more.

 

* For the record, none of us at Ypulse are qualified or licensed to give any financial advice, so please treat our musings in the spirit they’re intended—not as serious stock advice but as education and entertainment that illuminates what Millennials think and do, and their impacts on major brands.