The Bank of America Playing This Market by Buying Boomer and Selling Millennial
High-interest rates are helping keep baby boomer savings accounts flush. Young Americans, on the other hand, are struggling with debt and sky-high mortgage rates and rents, which is pushing them even further away from home ownership.
This is now driving new trade recommendations and suggestions from Bank of America, one in specific directed at taking advantage of the growing generational wealth gap and going long-term on old-folk shares. The narrative is to avoid those people whose wealth rides on the cash-strapped millennial.
This means cruise ship lines and American Express Co. are in and millennial outfits like the self-styled next-gen fashion retailer, Revolve Group Inc. is out. Ohsung Kwon, BofA quantitative strategist, a millennial himself said, “Millennials are really feeling the impact of the hiking cycle. Boomers, not so much. We’re starting to see a big diversion between the two.”
The fault line is slowly bubbling underneath an economy that on the surface has somehow stayed surprisingly robust, largely because of a steady consumer-spending spree since the end of pandemic-mandated lockdowns.
Who wins, who loses?
It’s likely there will be plenty of winners in sectors like entertainment and healthcare, where older folk tend to spend a lot of their funds, according to BofA. Home-improvement-based stock could also win big, as baby boomers are living way longer than prior generations and are starting to get reluctant to let go of houses with low mortgage rates.
On the flip side, however, retailers that sell clothes, a sector heavily skewed toward young people, are facing heavy headwinds.
The trend doesn’t look to slow down anytime soon with the US Federal Reserve intending to keep interest rates high for some time and the federal deficit that keeps surging putting pressure on bond yields. In turn, this ends up driving up what the US government will have to pay on Treasuries interest – which flows right back into investor pockets.
Blanke Schein Wealth Management’s chief investment officer, Robert Schein, said, “Pre-pandemic, the empirical evidence was there supporting that boomers are doing better than millennials in regards to investments, retirement accounts, and home ownership. And post-pandemic, that divide, because of higher inflation and elevated interest rates, has gotten dramatically worse. The divide is just gigantic.”
For now, Bank of America argues that baby boomer asset ownership and spending is more than enough to keep market consumption going. BofA has a positive outlook when it comes to consumer spending and stocks in the United States.