Thursday, June 25, 2015


On Tuesday, we wrote about the seeming lack of enthusiasm surrounding a stock market that is at or near all-time highs depending on which index you're following.  While this is in part due to the incredibly frustrating movements of the market over the last several months, we also believe certain structural shifts can be blamed.  

We mentioned some anecdotal evidence presented by Raymond James' Jeff Saut in Tuesday's blog:

"I have been buying the Barron’s every Saturday for the last 20 years, and the local grocery store where I buy it only orders about 5 of them. They are never sold out and what’s possibly more interesting is that they have stopped carrying the IBD. Now, I find this to be somewhat interesting only from the respect of the public’s lack of interest in the stock market."

And yesterday, Bloomberg came out with data further suggesting the public's dour mood toward stocks. The piece looked at the so-called Millennial generation's (defined as those between 18-34) thoughts on investing and saving.  A recent survey compiled by Goldman Sachs showed that only 18% of millennials polled viewed the stock market as "the best way to save for the future."  Meanwhile more than 40% said stocks weren't for them either because they didn't know enough, they thought the market was unfair or because it was too volatile of a venture.  The remaining 40% felt "skeptical" about the market and preferred to access it in small amounts or via "low risk" investments.

These results don't come as a complete surprise to us as we've had plenty of conversations with folks in the 25-40 age bracket that feel similarly.  An overriding distrust or avoidance of the stock market often comes up.  Also from the survey:

About 43 percent of the survey participants said they wouldn’t spend more than an hour getting guidance on an investment, while 13 percent of them said they wouldn’t seek out advice at all. Most also ask their parents how to handle their money.

In the event they came into a sizable sum of cash, almost half said they’d use it to pay down debt, which may not be surprising considering they’re shouldering more than $1 trillion in outstanding student loans. 

While this data is pretty eye-opening by itself, when we factor in the reality of Baby Boomers continuing to downshift the aggressiveness of their investment portfolios, it's easy to see that structural changes could be afoot.  Obviously we're not saying the stock market is headed toward extinction but it certainly could look much different in 10 years.  Less retail "home-gamers", a greater focus toward reducing debt and lower risk tolerances overall.  The counter-argument being that maybe this consensus attitude begins to unwind and helps to drive the next secular bull.  Could millennials eventually get on board with stocks and pave the way for the next boom and bust cycle?

It will be interesting to see how this plays out.

Ryan Worch is the Managing Director of Worch Capital LLC. Worch Capital LLC is the general partner of a long/short equity strategy that operates with a directional bias and while emphasizing capital preservation at all times.

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