The Millennials: Be Nice to Them

by | Dec 20, 2019 | Investing, Smart Financial Tips

As we are about to start not just a new year but a new decade, media and conversations naturally turn to what’s in store for all of us in the 2020’s.  Where are we going politically, socially, culturally?  As financial advisors, we’ll leave thoughts on key trends in those realms to others, and focus on the economy and markets and their longer-term drivers.

At Team Hewins we continually counsel that predicting the future is a very tough game and that forecasting shorter term market outcomes successfully is akin to a lucky roll of the dice or being dealt a great hand of cards.   Nevertheless, we ask and ask.  Will 2020 be a good year for the markets or not?  Where will the S&P 500 be in a year?  Interest rates?  Inflation?  Unemployment rate?   So far no one has come up a with a formula, model, machine, recipe, dance, or ritual that consistently and reliably produces accurate predictions.

The Demographic Driver

But thinking about the next decade versus the next year does allow for an examination of longer-term trends, particularly around demographics and their historical correlation with economic growth and investment returns.   Demographic trends have a reliability about them that stands apart from other trends because we know the current population by age; therefore, we can estimate the size of future populations by age group with a lot of confidence.  If we know how many people are in their twenties today, we then reliably predict how many people there will be in their thirties ten years from now.   That matters because as individuals enter the workforce, start earning, and form families their spending increases substantially.  Consumption is 70% of the economy¹; strong consumption trends are a leading driver of overall economic growth, business activity, and profit growth.

The Millennial Force

Are demographic trends a tailwind or a headwind as we enter the next decade?   In the years ahead we are clearly shifting to a more favorable demographic dynamic both in the United States and globally.  The strong economic growth and investment returns of the 1980’s and 90’s synched with the peak size of the US Baby Boom generation (80 million people in the US) which occurred in 1999².   After that peak and the transition to the much smaller GenX cohort (66 million at its 2018 peak) (Lee, Thomas et al. slide 48), we endured two recessions and two bear markets.  There were obviously many other factors at work as well, but it seems likely that these demographics had significant impact.

The US Millennial generation (people born between 1981-2000) with an average age of 26.5 is already at a count of 89 million on their way to peaking at 96 million (accounting for immigration) by 2038, 45% greater than the GenX peak.   Globally, the Millennial population is currently 2.5 billion, a full 1/3 of the world’s total  (Lee, Thomas et al. slide 48).

The Hard Part: Where will the Millennial Spending Go?

While the Millennials will provide a strong foundation for growth in overall consumer spending over the next two decades, it is not so clear as to which industry sectors, subsectors or individual companies will benefit most.  The basics – housing, clothing and food – will surely benefit, but even there which types of housing or what fashions and tastes will be most popular?  Which forms of technology, communications, financial services, health care, and energy will lead?   We can speculate, but there are no sure winners.

We therefore will stick to our core approach of maintaining a highly-disciplined and well-diversified investment program.   The Millennial spending power does not necessarily mean it will be smooth sailing through this two decade-long generational wave.  There were crises, recessions and steep market corrections during the Baby Boom wave, and there is no reason to believe we won’t experience similar challenges even as Millennial spending accelerates.  However, the Millennial support may help lessen the duration and magnitude of cyclical downturns and allow for longer and stronger cyclical upturns.

As a GenXer with lots of family and friends who are both GenXers and Boomers, let’s appreciate the potential for Millennials to drive above-average investment returns for all of us in the 2020s.

Wishing everyone Happy Holidays and best wishes for a great 2020!


John Bussel, Chief Investment Officer



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  1. J.P. Morgan Guide to the Markets, November 2019,
  2. Lee, Thomas et al. The Long Game: aka how to beat machines, February 2019,