Millennials vs. Baby Boomers: The Investment Challenge
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What question does this Money Briefing episode pose about investing by generation?
Here's your Money Briefing. I'm J.R. Whalen at The Wall Street Journal in New York. So if you thought about investing in companies geared toward baby boomers or millennials, which would you choose? The Journal's Heard on the Street team has some answers. We'll check in with them in a moment. First, these money and market stories you should know. If your wallet could smile, it might be because in the first quarter of 2019, American households more than made back their losses from last year's stock market turbulence. The Federal Reserve says that household net worth grew 4.5% in the first quarter to $108.6 trillion. that offsets a 3.7% decline in the fourth quarter of 2018. That was the largest quarterly gain since the fourth quarter of 2004.
Also, the household savings rate grew to 6.7% of disposable personal income, up from 6.5% in the first quarter. The Fed says much of that extra cash on hand comes from a 12.4% increase in the value of household holdings of corporate stocks. The 30-year fixed rate mortgage averaged 3.82% for the week of May 30th. That's down from 3.99% and its sixth straight weekly decline. It's also the lowest level since September 2017. Also, the 15-year fixed rate mortgage averaged 3.28%. That's down from 3.46%. And the Labor Department says the U.S.
What recent economic and market headlines set the context for the generational investment debate?
workers' efficiency, and that's essentially the output of goods and services for each hour on the job, improved by 2.4% in the first quarter as compared to a year earlier. That's the best rate in nearly a decade. But that pace could be difficult to maintain with economic growth expected to slow down later on this year. The journal's economic team says productivity improvements would be a key ingredient for the U.S. to maintain a 3% growth rate. That's a hallmark goal of the Trump administration. But in the current economic expansion, workers have been unable to sustain consistent productivity increases. That's one reason why the historically long stretch of growth has also been sluggish, advancing slightly better than 2% annually.
Call it a generation gap, or maybe with age comes wisdom, but when we put millennials and baby boomers side by side, is there a difference in how investors should approach companies that reach consumers in each age group? Well, the Journal's Heard on the Street team wanted to know, and columnist Mike Bird is here with the details. So, Mike, millennials generally were born between 1981 and 1996. Baby boomers were born in the mid-1940s. Your team set up two portfolios. Can you give me an idea of what kinds of stocks are in each group?
So the stocks are a pretty big mix across. We wanted to get a variety of different equity market sectors involved. The main difference between the stocks, I think, to put it clearly, is that the boomer stocks are designed to reflect the priorities of a generation that's either retired or coming into retirement and the sort of things they'll need in the years to come. There's a lot of health care related stocks, elderly care related stocks, also some real estate plays. Against the millennials who are a generation really now coming into their own, the elders millennials as you mentioned are coming into their very early 40s. They're approaching sort of peak spending power. They'll hit that within the next 10 years or so.
And so a lot of those companies reflect not just the millennial priorities around things like clean tech, but also things that will likely benefit from their increased spending power over the next 10 years.
And just a footnote, by millennials, we do not mean people born after 1996, which is Generation Z. Absolutely. Talking about millennials here. You mentioned in the baby boomers portfolio, there's a lot of health care, a lot of pharmaceuticals, and that makes a lot of sense. That's not going away anytime soon.
No, absolutely not. But it is a new thing in many ways. So a lot of the companies you see launching for biotech, for example, they're addressing concerns, health concerns that, to be frank, 10 or 20 years ago might have been a death sentence for a lot of people.
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