You Can Thank Millennials for This Market Volatility

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Ah, the millennials.

They’re a fascinating bunch.

They’ve been labelled entitled, moody, and even lazy. Criticisms they themselves will and have refused to accept.

Instead, they’d probably label themselves as open-minded, authentic, and tech-savvy. A generation that has pioneered the social media age.

Though generation Z are likely to be the ones who perfect it. But I digress…

My point is, everyone has an opinion when it comes to millennials. Good, bad, or indifferent — everyone is ‘talkin’ ‘bout my generation’.

As a millennial myself I know that all too well. And I’ll be honest, I don’t really care what people think or say.

I’m sure there are plenty of lazy and entitled people my age. Just as there are plenty of open-minded and authentic ones.

Same goes for those older and younger than me. Every generation has its fair share of positives and negatives.

What I do care about though, is how the millennials act. Because what they do has far more sway than how they are perceived.

And this is particularly important when it comes to the financial world.

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Take from the rich

As a generation, many millennials came into adulthood at an awkward time.

The Global Financial Crisis was the defining event of their transition into the ‘real world’. One that gave them plenty of reasons to be sceptical and averse to the financial system.

Keep in mind, I’m not saying they copped the worst of this crisis either. Older generations, especially those who were retired or close to it bore the brunt of the cost.

Mentally though, it changed how everyone viewed the financial system.

And for this young, impressionable cohort it was a catalyst for distrust. One of the main reasons why so few millennials are investors.

That is, until recently…

Lately I’ve started to notice more interest from people my age in the stock market. Both anecdotally and categorically.

In fact, it’s a subject that my fellow editor, Sam Volkering, touched on earlier this week.

He discussed the recent ‘Robinhood rebound’. A phenomenon that revolves around the popular investing app Robinhood.

To make a long story short, this app has become a favourite of millennials. It has given them a tool to invest through technology they are familiar with. Oh, and the ‘fee-free’ incentive certainly helps too.

The duo behind the app, Vladimir Tenev and Baiju Bhatt, know how to market it too. Tapping into millennial angst by promoting Robinhood as a way to ‘level the financial playing field’. Rekindling and using the mistrust to offer an alternative.

It’s genius really, and it worked.

But what has been truly surprising is just how kind 2020 has been to Robinhood. As Rob Walker summarised in a recent article:

A global pandemic has thrown the world’s economy into a terrifying tailspin.

The stock market’s gyrations, which often seem wholly disconnected from the actual economy, are more unpredictable than ever — and no less an investment wizard than Warren Buffet says his fund remains on the sidelines because “we don’t see anything that attractive” to buy.

Yet somehow an app designed to encourage inexperienced young Main Streeters to play the market, and that has been dogged by reliability issues, is a smash hit, bolstered by the smartest Silicon Valley investors.

I’d encourage you to check out Walker’s full article actually. It’s a bit lengthy, but it will give you plenty of insight into how Robinhood became the phenomenon it now is.

The key takeaway though, is that has been attracting plenty of interest.

Indeed, I think this pandemic and forced isolation has been the best thing to happen to Robinhood. It has turned day trading into a new pastime for the young and bored.

For better or worse…

No strategy, no clue, no problem

See, this new influx of young, overconfident investors is a big reason for our current market. Or at least, the sentiment surrounding it.

While central banks are likely the reason behind this incredible rally, millennial investors are the ones benefiting from it.

Take this snippet from CNBC, for example:

One 26-year-old Robinhood trader made $1,500 in less than 24 hours betting on a beaten-down airline stock, while many so-called experts on Wall Street warned about buying into an overvalued stock market that was bound to tumble again amid the coronavirus pandemic.

While most of the stalwarts of investing are sitting on the sidelines, these young investors are cleaning up. Riding a rally that for the most part defies all logic.

Trouble is, logic doesn’t seem to rate for many of these new traders either.

The ABC for instance recently interviewed several of these first-time investors. A piece that contained some, shall we say, bold sentiments.

Just take a read of some of the quotes:

My sense of FOMO [fear of missing out] and missing out on the big gains was my impetus for getting involved.

I’d just rather see when it [the stock] goes down and buy and hope it goes up again. That’s my strategy.

If that company goes bust, well too bad. No more coffees for the year or no more new clothes.’

These are three separate quotes from three separate people. All of whom started trading in the aftermath of this pandemic and subsequent market crash.

What can I say, except that they’re clearly very care-free…

To you and me, they probably seem naïve or ignorant. You could even call them dumb.

After all, as we saw yesterday, the market has plenty of volatility left. And I’ve got no doubt that many of them will get burned at some point.

In the grand scheme of things though, it’s better to learn from your mistakes now than later. The younger you are, the dumber you can afford to be as an investor. To a certain extent anyway…

For you and me though, it presents a conundrum. This brazen and illogical type of investing has hijacked the market.

A situation that even has old hands second-guessing themselves. Whether they will dare to try and keep up with these brash young investors will remain to be seen.

But, either way, you can probably thank (or blame) the millennials for propagating a lot of the market volatility of late.

They may not be the reason for it, but they’re damn well taking advantage of it.


Ryan Clarkson-Ledward,
Editor, Money Weekend

Ryan is also the Analyst of Australian Small-Cap Investigator, a stock tipping newsletter that hunts down promising small-cap stocks. For information on how to subscribe and see what Ryan’s telling subscribers right now, click here.

About Ryan Clarkson-Ledward

Ryan Clarkson-Ledward is an Editor at Money Morning.

Ryan holds degrees in both communication and international business. He helps bring Money Morning readers the latest market updates, both locally and abroad. Ryan tackles all the issues investors need to know about that the mainstream media neglects.

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