“To me it just doesn’t seem logical, that you could save all that money and then potentially lose it all down the road.”
– Diane Casaretti, 26-year-old marketing rep
The Generation Yers – now in their twenties and early thirties – want absolutely nothing to do with the stock market.
In their early teens, they watched their parents get destroyed by the dot com bubble, Enron, Worldcom, and then the World Trade Center attack just to put a cherry on top.
Then, in college, they came home to visit their folks and found foreclosure notices tacked to the door, watched their mothers and fathers and uncles and aunts declare bankruptcy, lose their 401(k) savings and end up walking away from houses to live in rentals.
During the brief stint that Generation Y has been conscious of the adult world and the embryonic fluid of finance that succors it, they’ve seen nothing but death and dismemberment emanate from Wall Street.
It should come as absolutely no shock to you at all that 30% of this generation has just told a survey they would NEVER invest in the market.
Take a recent Investing Sentiment Survey by Boston-based money managers MFS Investment Management. The poll discovered that 29 percent of people say they will never be comfortable investing in stocks – a shocking number in and of itself. But among Generation Y investors under 31, that number spikes to 52 percent.
If that sentiment holds, it means that a large chunk of an entire generation of investors could be shunning equities for years to come. And that’s not exactly a tailwind for the Dow. “Those numbers are surprising to us, but you can’t really blame them,” says William Finnegan, MFS’ senior managing director.
In my forthcoming masterpiece book Backstage Wall Street (now available for pre-order here), I talk about the marketing schemes that the financial services industry has used over the years to entice reticent investors of every generation off the sidelines. With this particular generation, however, The Street has its work cut out for it.
The good news is that this kind of sentiment is a contrary indicator – stocks have to be utterly despised before a true bottom can be said to be in place. I would also say that it only takes a sustained bull market of a couple of years for people to forget the blood and guts – so it will be interesting to revisit this story if and when that ever develops.