What if Millennials and Baby Boomers are One and the Same?

by Michael Antonelli, Managing Director, Market Strategist, Baird & Company

There’s lots of things that drive stock markets. Interest rates, wars, corporate profits, sentiment, valuations, etc, but there’s something we rarely talk about that exerts a far more powerful force: demographics.

I’ve always said that if someone talks about demographics you should pay attention because when it boils down to it, how many people there are, and what they produce/consume, is what drives an economy (and its stock market) over the long run.

The title of this blog is a bit cheeky, clearly the two generations are not one and the same, but what if they are from a market perspective? Stick with me here.

Allow me to define the “prime” of someone’s life as generally a decade between their mid-30s and mid-40s. Some have their prime earlier, some later, some people have longer time spans, but let’s just go with that for now.

In your late 30s, early 40s, you are well into your career. You’ve likely started a family, you are buying cars, homes, and egg bites at Costco. You have wisdom about what works and what doesn’t in life, and you are saving/investing for the future.

Baby Boomers encompass the years of 1946 to 1964. That generation, which was one of the largest in history, started to hit their primes in the mid-80s. The market and economy would go on to experience a boom as a gigantic generation worked, consumed, and invested.

My generation, Gen X, encompass the years of 1965 to 1980. We are a relatively small generation and started to hit our primes in 2000. The next 13 years would see sideways markets and lower growth, basically a lost decade for investors. We just weren’t a big enough group to hold up the economy in our primes. Give us a break though, we brought you Nirvana and Pearl Jam.

Millennials encompass the years of roughly 1980 to 1995. That generation, now the largest in history, is JUST coming into their prime years. In fact, the oldest millennial is only 41. They are a gigantic group (like Boomers) that will also work, consume, and invest. They will be buying homes, cars, and egg bites at Costco (they’re so good) for years and years to come.

Here's the best part. When Boomers came into their prime, interest rates were high. In 1985 mortgage rates were near 12%. Today, interest rates are near zero, you can get a mortgage for 3%. That quirk of fate should pour JET FUEL on their consumption.

Now there will be people who disagree with this take, you literally can’t shake a stick without hitting an “expert of a different version of the world” who is calling for a catastrophic end to the market and the economy because of valuations or inflation or the Fed or whatever. They may be right, literally no one knows, but don’t sleep on the importance of this gigantic group.

In fact, it’s entirely likely we are going through a period of exponential growth (biotech, spaceflight, crypto, mRNA) and people are just bad at recognizing what that looks like.

When might this tailwind abate? The median Baby Boomer moved through their prime by the year 2000, that’s when Gen X took over and things slowed.

That same year for Millennials is out in the 2030s and, by the way, the group following them, Gen Z, is also large (roughly 68mm). It’s not anytime soon.

The demographics of the United States are good right now, with low interest rates and rapid technological innovation. Baby Boomers guided the economy for a decade plus, now Millennials will.

We will have our ups and downs but our largest generation are all working age and that’s super important.

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