More concerning yet, America’s largest generation hates the stock market — or at least has developed a strong suspicion and ambivalence toward it. Financial information website Bankrate.com reports that only one-third of the demographic from age 19 to 35 invests in the stock market.
Much of the blame for this phenomenon, of course, rests with the financial crisis of 2008 and 2009.
“Not just having observed what happened since 2009, but I think watching their parents go through it,” said Liz Ann Sonders, chief investment strategist for Charles Schwab, in a recent interview with Business Insider CEO Henry Blodget. “I think that’s going to be a tough psyche to break. I think we really did arguably change a generation of investors much as the Great Depression did.”
So is the US economy in peril at the hands of a vast, frugal swath of maturing adults that refuses to participate and breathe life into it? The truth is far less gloomy in the eyes of Sonders, who says a “cookie cutter approach” to analysing such a wide generation is misguided.
“I’m not as dour and pessimistic about what millennials mean to either the stock market or to the economy as many are,” she said. “They’re not all going to not invest, live in 600-square-foot apartments with two roommates, only take Uber when they need to go somewhere, and never stay in a hotel and only do Airbnb.”
In reality, according to Sonders, as millennials get older and start families, their consumption habits don’t differ so much from past generations — they tend to loosen up and buy a house and a couple cars.
On the investing side, Sonders says millennials are actually warming to markets when they can find low-fee, passive investing options, hence the popularity of robo-advising.
“They don’t want to pay extraordinarily high fees for a service they don’t perceive as terribly necessary. They like things electronic. They want to be able to see what’s going on but they don’t need a team or person handholding them through the whole process,” says Sonders.
Moreover, thanks to the prevalence of employer-sponsored 401(k) programs that default to enrolling workers, much of the younger generation is building a decent wealth cushion.
“These investors are automatically investing at a younger age than I know I did,” Sonders said.