It's hard to be bearish on the stock market as risk-happy Millennials inherit $2 trillion per year, Fundstrat's Tom Lee says
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Trillions of dollars flowing into risk-tolerant millennials will improve stock market fundamentals for years, says Fundstrat's Tom Lee.
Lee identified four factors that show the extent of intergenerational wealth transfers underway.
"I believe that both the crypto and stock markets are powered by millennials," said Cathie Wood of ARK Invest last week - after previously citing Lee's work as evidence of this theory.
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Trillions of dollars flowing into risk tolerant millennials will boost stock market fundamentals for years, making it hard to be too bearish, Fundstrat's Tom Lee wrote in a statement Friday.
Building on previous research, Lee pointed to four factors that indicate the extent of generational wealth transfers underway:
Fundstrat estimates that $ 2 trillion in wealth flows annually from baby boomers to millennials through inheritance
Millennials will inherit $ 76 trillion from previous generations over the next 20 years
Millennials tend to prefer riskier assets like stocks and crypto
Baby boomers will have a smaller relative share of the wealth pool, which means that millennial wealth preferences will fuel structural change
Lee argued that the logical conclusion from these data points is that investors should take a long-term bullish view of stocks.
"Can you be structurally pessimistic about stocks if that is the case?" he said.
Lee has previously made similar arguments in favor of sustained upward movement, pointing to other structural factors such as loose monetary policy and ample cash on the sidelines.
"Bull market through 2038? This is a possible base case. ... If demographics dictate, US stocks will do very well," wrote Lee in June, pointing out that every stock market since 1900 has coincided with the peak of a generation .
It's a theory shared by ARK Invest's Cathie Wood that cites Lee's research as evidence.
"I believe that both the crypto and stock markets are powered by millennials," Wood said at a conference last week. "They are really excited about the new technologies that are emerging today - they are really at the forefront and they understand and are comfortable with it."
In his Friday note, Lee discussed new data from the Federal Reserve showing that U.S. household wealth rose to $ 142 trillion in the second quarter. With only $ 46 trillion invested in U.S. stocks, theoretically about $ 100 trillion could still be invested in stocks, which underscores how much leeway stocks still have.
He also explained why America's wealth inequality is not as severe as some of the topline numbers suggest - noting that the 20 richest Americans were "ridiculously rich," but only 1.2% of total US wealth made out.
"That means America has a lot of wealth and there are just a lot of mega-rich," Lee said.
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