This Generational Shift Will Fuel the Dow's Surge to 100,000
By Aaron James
CEO, Banyan Hill, Money & Markets
Banyan Nation,
The Dow Jones Industrial Index (DJIA) is heading to 100,000.
As I mentioned last week, AI is a huge part of it.
But there’s another reason…
It’s thanks to demographics, the data used to look at populations as a whole.
Demographics indicate some significant shifts as the millennial generation hits their peak earning years.
Each generation follows a different lifestyle. What matters most as an investor is how each generation spends their money.
Following the spending trends of any generation as they hit their peak spending years can lead to better market returns.
It can mean the difference between making 200% to 300% in a decade just following the index, compared to earning as much as 5,260% in 10 years.
Done right, following a generation’s peak spending years can make you a millionaire.
Knowing which generation is on the rise and how they spend can have huge investment implications.
And investing in the right companies can make a huge difference in your wealth over a lifetime.
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How Following the Baby Boomer’s Spending Trends Led to the Market’s Winners
To understand the future, let’s take a look at the past, starting with the baby boomers.
They’re the group born between 1946 and 1964. The boomers born in 1964 are turning 60 this year. It’s safe to say this generation is either in, at or near retirement.
And what a run they’ve had!
As the boomer generation grew up, some industries saw massive growth at different stages of their life-cycle.
Toymaker Mattel (NYSE: MAT) was a big winner in the 1950s. Media giant The Walt Disney Company (NYSE: DIS) was the best-performing S&P 500 company between 1950 and 1980, soaring over 800%.
There were some growing pains along the way…
The boomer generation started to earn money in the 1960s and 1970s but had to contend with high inflation and soaring commodity prices. The 1974 bear market was a brutal 50% pullback, combined with double-digit inflation. Ouch.
That may have pushed that generation to look for reasonable everyday prices. It should be no surprise that retailer Walmart (NYSE: WMT) soared 5,260% during the 1980s as the last of the boomers became adults and started spending.
As the boomers entered the workforce full-time and began to save and invest, financial services soared to cater to their needs. Between 1950 and 2000, financial services quadrupled to over 8% of GDP.
The stock market saw some of its best returns in the 1980s and 1990s thanks to this shift.
In 1950, the percentage of Americans who owned stocks stood at just 6%. By 2000, it peaked at 61% — just as the first of the boomers hit their mid-50s.
So it’s clear that the boomer generation’s spending included a mix of material things as well as investing in financial assets over the years.
That combination allowed the Dow to soar from 3,500 in 1980 to 20,100 by the year 2000.
(Click here to view larger image.)
Amid that trend, again, specific stocks did even better.
Warren Buffett’s Berkshire Hathaway (NYSE: BRK-A), a conglomerate that largely owns insurance other financial companies, rose 4,490% in the 1980s. Since 1965, it’s beaten the S&P 500 by 120X!
Investing in some of the top-performing stocks that play to those spending trends can mean the difference between earning 150% to 200% over 10 years — or 4,400% to 5,260%.
Good news: Catching the right stocks at the right point of the millennial’s peak spending cycle should see similar results. And why Dow 100,000 is in my sights today.
The Millennial Shift: Experiences & Tech Over “Things”
Today, the millennial generation is on the rise and entering their peak spending years.
That has huge implications for the market going forward.
For starters, the millennial generation is a slightly larger group than the baby boomers. Millennials number 72.1 million compared to 71.6 million boomers.
On the spending side, millennials are behind boomers in housing spending. 42% of them are homeowners by age 30, compared to 51% of boomers.
Part of that lower spending on housing may reflect the fact that median home prices have soared in real terms since 1970, when the earliest boomers began buying homes.
(Click here to view larger image.)
By today’s standards, a home is about 66.7% more expensive in real dollars than in 1970.
Sounds like the kids are just making a wise decision by buying other assets instead.
By living with their parents longer, millennials have been able to spend and invest money that would otherwise have gone into housing.
Recent studies show that millennials have no issue with earning, spending and even investing.
64% of millennials are currently invested in the stock market, slightly above the average for all Americans (61%).
Of those investors, 65% say they’re faring above average, thanks to their increased willingness to invest heavily in tech stocks.
That may include many of today’s well-known companies like Microsoft (Nasdaq: MSFT) and Apple (Nasdaq: AAPL).
However, you may not always want to invest in a company just because it seems to cater to millennials.
Adam O’Dell, our systematic investment expert at Money & Markets, just pointed out in Friday’s Banyan Edge that, since its IPO, investment app Robinhood (Nasdaq: HOOD) has declined 45%.
However, another tech-heavy investment platform that he recommended for his Green Zone Fortunes members is up nearly 80% over the same period.
While millennials are spending less on homes and even cars, they are willing to crack open their wallets to travel. Investors may be surprised by the performance of hospitality and tourism stocks in the years ahead.
While millennials favor experiences over things, they’re also a tech-savvy generation. They grew up during the rise of the personal computer and internet boom.
So when it does come to shopping for things, they’ve massively embraced e-commerce. Investors may not want to overlook opportunities to play to that trend, even in mega-caps like Amazon (Nasdaq: AMZN).
Next, millennials are benefiting from today’s technology booms in everything from AI and cryptocurrencies to EVs and green energy.
As I mentioned last week, the AI boom is likely to fuel a productivity boom at least as large (likely larger) than the internet.
And millennials have already adapted quickly to these new technologies. The latest jobs created to address this new tech trend will primarily go to that generation and pay well, increasing income for millennial workers to travel and invest further.
Today’s AI technologies can help give America’s economic growth a shot in the arm.
The shift to a generation that’s grown up comfortable with today’s technology may help accelerate the development of even more new technologies.
That’s why the rise of millennials could mean that markets have a massive bull run in the coming years.
Investors who invest in the right travel and tech stocks stand the best chance of beating the market’s returns even further.
The Demographic Shift Won’t Impact Dow 100,000
I’ve made it clear that I'm already targeting Dow 100,000, even if it’s “only” near 40,000 today.
From 40,000, the Dow has to rise 150% to hit 100,000. That’s easily achievable, especially if we’re in the early stages of an AI-driven tech stock boom.
Yes, we’ll have our ups and downs on the way there. But we could be there before the decade is out.
That’s because the markets are now being driven by new technologies such as AI, cryptocurrencies, automation, EVs, you name it.
These are the next generation of tech companies. The ones that will be added to the Dow in the years ahead and help it soar to 100,000 and beyond. And where millennial investors are flocking today.
Adam O’Dell calls these companies “Tech Titans.” He just released the latest research on them, and how their growth can play out in the years ahead.
Sounds like the stock market will be just fine.
Yes, there are some generational differences between boomers and millennials.
Millennials are a bit more averse to having debt. And they’re behind other generations in terms of buying homes. They spend less on things and more on experiences. But they’re still earning, spending and investing.
Understanding those differences can help you navigate these investment opportunities as millennials hit their peak spending years — and send the Dow to 100,000.
So whether you’re a millennial or not, their spending trends could make you millions.
Our experts at Banyan Hill will continue researching the best investment opportunities as this demographic trend plays out … all while making investing safe, easy and fun.
Aaron James
CEO, Banyan Hill, Money & Markets
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See how you can invest alongside him (but you’ll want to do it between now and May 5. |
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