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.”
TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets climbed to their best week of the year.
“It’s been almost a complete opposite or retracement of what we saw last week,” said Philip Petursson, chief investment strategist at IG Wealth Management.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
While last week saw a “healthy” pullback on weaker economic data, this week investors appeared to be buying the dip and hoping the central bank “comes to the rescue,” said Petursson.
Next week, the U.S. Federal Reserve is widely expected to cut its key interest rate for the first time in several years after it significantly hiked it to fight inflation.
But the magnitude of that first cut has been the subject of debate, and the market appears split on whether the cut will be a quarter of a percentage point or a larger half-point reduction.
Petursson thinks it’s clear the smaller cut is coming. Economic data recently hasn’t been great, but it hasn’t been that bad either, he said — and inflation may have come down significantly, but it’s not defeated just yet.
“I think they’re going to be very steady,” he said, with one small cut at each of their three decisions scheduled for the rest of 2024, and more into 2025.
“I don’t think there’s a sense of urgency on the part of the Fed that they have to do something immediately.
A larger cut could also send the wrong message to the markets, added Petursson: that the Fed made a mistake in waiting this long to cut, or that it’s seeing concerning signs in the economy.
It would also be “counter to what they’ve signaled,” he said.
More important than the cut — other than the new tone it sets — will be what Fed chair Jerome Powell has to say, according to Petursson.
“That’s going to be more important than the size of the cut itself,” he said.
In Canada, where the central bank has already cut three times, Petursson expects two more before the year is through.
“Here, the labour situation is worse than what we see in the United States,” he said.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
— With files from The Associated Press
This report by The Canadian Press was first published Sept. 13, 2024.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
