The global investing landscape is poised to shift over the next decade, thanks to the largest U.S. generation: millennials.
As the longest-running bull market enters its 11th year, some portfolio managers are advising clients to stay invested in stocks because a series of trends, including an aging population, smart technology and automation, should further fuel returns in coming years.
Millennials, people born between 1981 and 1996, will be approaching age 50 in 2030, while the tail end of baby boomers will reach retirement age. By 2025, millennials are projected to comprise roughly 75% of the workforce.
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Baby boomers and the so-called silent generationthat preceded them control about 77% of wealth, according to Fundstrat Global Advisors’ analysis of the most recent Federal Reserve Survey of Consumer Finances. But that is about to change. By 2030, millennials will hold five times as much wealth as they have today and are expected to inherit over $68 trillion from their predecessors, according to a study by Coldwell Banker Global Luxury.
That demographic shift, economists say, is expected to help boost U.S. economic growth and credit demand as more young adults buy big-ticket items like houses and cars. That will also reshape industries they’re closely aligned with, including technology, e-commerce and social media, they said.
“Economic expansions don’t die of old age,” says Larry Adam, chief investment officer for the private client group at Raymond James. “But I do think it’s going to get more challenging over the next decade.”
The 2020s won’t be all about Big Tech
High-growth technology companies including the popular FAANG stocks – Facebook, Amazon, Apple, Netflix and Google parent Alphabet – have propelled the decade long bull market. Investors, however, have now opted for beaten-down value stocks like energy and financial sectors that have underperformed the broader market in recent years.
Although tech shares aren’t expected to repeat their performance over the past decade, some experts continue to favor them over the long term because of the far-reaching impact they have on other industries.
“The technology sector continues to reinvent itself,” Adam says. “Every sector has some form of technology.”
Investors who are searching for other parts of the market to potentially deliver above-average growth in the coming years should look to stocks that have exposure to sustainable investing, digital transformation and genetic therapies, analysts at UBS said.
Emerging markets come back in favor
Emerging market assets, which have been pummeled in recent years by fears of slowing global growth, are expected to come back in favor as population growth rises and de-escalating trade tensions.
Demographics are expected to be a significant driver of growth across many economies. Investors are betting on growth potential in India, as the economy is on track to overtake China as the world’s most populous country by 2027, according to the United Nations.
Meanwhile, Vietnam, one of Asia’s fastest-growing economies, has been a haven for U.S. multinationals looking to shield themselves from the U.S.-China tariff spat.
“There’s huge growth potential in Asia,” says Rich Sega, global chief investment strategist at asset manager Conning. “The geopolitical stress in Hong Kong has opened up opportunities for other areas in the region for Vietnam, Thailand and Singapore.”
Don’t count out U.S. stocks
To be sure, economists are optimistic about domestic growth and don’t foresee a recession within the next year. Economists project a 35% chance that the U.S. economy will enter a downturn between now and the November presidential election, according to Bankrate’s Fourth-Quarter Economic Indicator survey. That’s down from 41% from the prior quarter.
Some analysts believe this economic expansion and record run still has legs.
“U.S. stocks will surprise investors,” says Thomas Lee, managing partner and head of research at Fundstrat Global Advisors. “Too many people are betting on a bounce-back in emerging markets.”
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