Chart of the Week: Gen Z Investors Will Determine Stock Market Winners
Author: Tim Phillips
June 18, 2021
Although 2020 will go down as an extraordinary year of gains for a lot of tech stocks amid a global pandemic and worldwide shutdowns, it also marked a new era of investing.
Whether that was the acceleration of megatrends that were already playing out, such as e-commerce or digital payments, or the collective “wokeness” that something needed to be done about climate change, it was a watershed moment.
A lot of these megatrends, and their popularity, can be attributed to Gen Z – typically defined as those born between 1996 and 2016.
That’s primarily because this generation has never known life before the Internet, a realm they feel at home in.
Driving the world in new directions
Perhaps more surprisingly, in North America, Gen Z’s income will rise exponentially over the next two decades (see below).
By the end of this decade, it’s estimated that Gen Z income will make up over a quarter of the total in North America. By 2040, their income will overtake that of Millennials.
Clearly, this is going to have ramifications for the investment world. We’ve already seen (perhaps the less savoury side of that) play out in 2021 as meme stocks and joke cryptocurrencies have taken off.
Beyond that, there are real investment implications with how Gen Z will not only live their lives, but also invest.
For example, only half of US teens can drive whereas more than half of those of drinking age abstain from it.
These are just two examples of the way young people are impacting trends and it’s not necessarily only applicable to North America.
For long-term investors, the continued rise of Gen Z globally is going to impact everything from car consumption to streaming to the rise of “conscious investing”.
Ensuring we stay abreast of how the younger generations are shaping the future will no doubt play a crucial role in our long-term investment returns.
North America generational income growth, 2015-2040 (US$ trillions)
Tim, based in Singapore but from Hong Kong, caught the investing bug as a teenager and is a passionate advocate of responsible long-term investing as a great way to build wealth.
He has worked in various content roles at Schroders and the Motley Fool, with a focus on Asian stocks, but believes in buying great businesses – wherever they may be.
In his spare time, Tim enjoys running after his two year-old son, playing football and practicing yoga.