How The Next Generation Of Investors Can Profit Off The Changes It’s Making

Generation Z, Gen Z, is anticipated to significantly speed up or transform consumer trends, and experts are remarking on how this age group can make the most of investing as it ages. 

Bank of America researchers recently defined Zoomers (another name for Gen Z) as those born between 1996 and 2016 and predicted it would become the “most disruptive generation ever.” 

As many zoomers are getting their first jobs, Bank of America predicted this generation’s income would top millennials as soon as 2031 as “The Great Wealth Transfer,” from previous generations only contributing to their power as consumers.

During a new podcast from McKinsey & Company, a management consulting firm about how zoomers are revolutionizing the future of retail, Bo Finneman, one of the firm’s partners, noted that as a whole, Gen Z would achieve scale within ten to 15 years.

But, Finneman stated that “we’re really looking at them as the core influencers today that have a really big impact on both millennials and Gen-Xers in terms of what they buy.” 

With this in mind, how can you recognize and invest in the shifting trends that Gen Z is creating?

Research Stock Indexes

Carsten Menke, the head of next-generation research at Julius Baer, a private bank, told CNBC that one of the easiest ways to determine consumer trends is to study stock indexes.

“In the end, the composition of an equity index like the S&P 500 is a mirror image of how consumers spend their money,” he told reporters.

One factor why Facebook, Amazon, Google, Netflix, and Apple has outperformed is because consumers are putting more of their money toward “cloud computing, services like AI, like video streaming, etc.,” Menke explained. 

Nearly 50% of the 9,800 teenagers surveyed in a biannual poll by Piper Sandler, published last October, reported Amazon as their preferred online retailer. Over four-fifths of respondents had an iPhone, while 89% said their next device would be an iPhone.

Technology

A large percentage of experienced investors have cautioned about Big Tech’s soaring stock prices, with many comparing their rise to the dot-com bubble, insinuating that this sector can only go so high.

ButSaxo Bank’s head of equity strategy Peter Garnry said that this performance could go on longer since the next generation of investors did not assess these companies’ stock valuations but rather purchased shares on the grounds of “narratives, stories and themes.”

The video game industry is also poised to reap the benefits of Gen Z’s growing power as consumers, with Bank of America researchers citing that zoomers account for 90% of the sector’s users.

Sustainability

Sustainability is a large factor that has molded Gen Z’s consumer behaviors and contributed to the rise and fall of several companies — something that has not gone unnoticed by experts, professional investors, and researchers. 

The Bank of America study found that zoomers’ desire for sustainable consumption is changing trends in meat consumption, with data from Euromonitor concluding that this generation makes up the most significant percentage of people who limit their consumption of meat.

A growing number of companies selling plant-based and lab-grown meat substitutes have gained a foothold in this industry. Menke noted that Beyond Meat is the only company in this sector that investors can trade on Wall Street, but more would join over the next decade. He added that these companies’ rise would force corporations like Nestle and Danone to make drastic changes to their business model to adapt.

Menke told CNBC that for Nestle and other behemoths, it is “crucial to understand how the consumption behaviors of the consumers are changing in order not to be left behind.”

In the same vein, Menke remarked that businesses in the mobility industry, such as Lyft and Uber, provide additional sustainable alternatives and enjoy more demand and heightened growth thanks to younger investors.

Bank of America found that only 31% of consumers aged 18 to 34 were planning on purchasing a vehicle in the next 12 months, while also referring to Euromonitor’s findings that families with consumers between the ages of 15 and 29 had the highest rate of electric vehicle ownership.

Globalization

Experts have long discussed the impact of aging investors in established markets compared to young traders’ rise in developing markets. 

Bank of America emphasized that nine out of ten zoomers reside in emerging markets, specifically citing India as a leading Gen Z nation. On the other hand, Europe is the first to experience “peak youth,” with a larger number of older adults 65 and older than youths under 15. The US is anticipated to reach this point next year.

Although some investors might feel tempted to invest in global markets based on these shifting demographics, Garney explained that it’s not that easy. He told CNBC that globalization has led to greater synchronicity across multiple markets, so “a lot of the largest companies in every single equity index are multinational by definition.”

He added that investors might struggle to tap into the stock market or run into other obstacles in developing countries. However, he noted that some businesses listed in developed markets do provide access to their emerging counterparts.

 

Source
  • McKeever, Vicky. “How Gen Z Can Invest and Make Money from the Dramatic Rise of Its Own Generation.” CNBC, CNBC, 28 Dec. 2020, www.cnbc.com/2020/12/28/how-gen-z-can-invest-for-the-dramatic-rise-of-its-own-generation.html.

 

Ian Schindler