Millennials are driving a regime change in the stock market
Millennials are coming for baby-boomer investors, and the imminent regime change was front and center this week after a 6-million strong Reddit forum sparked massive short-squeezes in certain stocks at the expense of Wall Street hedge funds.
That's according to a Friday note from Fundstrat's Tom Lee, who has been fielding a flurry of calls this past week from institutional investors who are trying to make sense of the price action in stocks like GameStop and AMC Entertainment.
The short-squeezes have been driven by a surge in retail investing, which has been enabled by trading apps like Robinhood, which offer $0 trading commissions and make it easy to buy or sell a stock.
"I believe the rise of retail investors is structural, led by Millennials," Lee said, adding that there are marked differences between them and the baby-boomer generation, which controls a bulk of the wealth on Wall Street.
"Millennials are already very critical thinkers, thoughtful and cost conscious, with habits so different from GenX and Baby Boomers, that this is going to upend how many industries operate," Lee said.
The same type of disruption that hit the hotel industry with Airbnb and the taxi business with Uber is now headed for the financial markets, Lee opined.
And this new group of retail investors is a force to be reckoned with when you consider that the millennial generation, combined with its younger counterparts Gen Z and post-Gen Z, make up over 50% of the US population, the note said.
"The impact from Millennials is set to go to 'Plaid' mode in the next decade," Lee said in an apparent nod to Tesla's premium Model S vehicle. The main reason why? They're on the verge of inheriting $68 trillion in assets over the next two decades, according to the note.
That's about 70% of the $100 trillion controlled by US households.
"Get the picture?" Lee asked.
So how will things change for the markets? Lee highlighted the 6 major differences between millennial and baby-boomer investors to try and find an answer.
1. Millennials are stock heavy where as baby-boomers are bond heavy.
2. Millennials favor self-directed investments whereas baby-boomers favor hedge funds and mutual funds.
3. Millennials favor trading apps like Robinhood whereas baby-boomers utilize "White shoe investment banks."
4. Millennials are getting their information from Reddit and TikTok where as baby-boomers favor Grant's Interest Observer.
5. Millennials favor thematic investing in long-term disruptive trends whereas baby-boomers fundamental investing.
6. Millennials favor digital assets like bitcoin where as baby-boomers favor physical gold.
"$68 trillion....yup," Lee concluded.