- Trillions of dollars flowing to risk-tolerant Millennials are set to boost stock market fundamentals for years, says Fundstrat's Tom Lee.
- Lee identified four factors that show the scale of the generational wealth transfer underway.
- "I do believe that both crypto and the equity markets are going to be powered by millennials," ARK Invest's Cathie Wood said last week – having previously cited Lee's work as evidence for this theory.
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Trillions of dollars flowing to risk-tolerant Millennials are set to boost stock market fundamentals for years, making it hard to be too bearish, Fundstrat's Tom Lee wrote in a note on Friday.
Building on past research, Lee pointed to four factors that show the scale of the generational wealth transfer underway:
- $2 trillion of wealth flows from Baby Boomers to Millennials per year through inheritance, according to Fundstrat estimates
- Over the next 20 years, Millennials will inherit $76 trillion from previous generations
- Millennials tend to prefer higher-risk assets like stocks and crypto
- Baby Boomers are becoming a smaller relative share of the pool of wealth, meaning Millennial asset preferences will fuel a structural shift
Lee argued that the logical conclusion of these data points is that investors ought to take a long-term bullish view on stocks.
"Can one be structurally bearish on stocks if this is the case?" he said.
Lee has previously offered similar arguments for permanent bullishness, pointing to other structural factors like easy monetary policy and abundant cash on the sidelines.
"Bull market until 2038? This is a possible base case. ... If demographics are destiny, US stocks will do very well," Lee wrote in June, pointing out that every stock market peak since 1900 has coincided with a generation's peak.
It is a theory shared by ARK Invest's Cathie Wood, who has cited Lee's research as evidence.
"I do believe that both crypto and the equity markets are going to be powered by millennials," Wood said at a conference last week. "They're really excited about the new technologies that are evolving today - they're really at the leading edge of them and understand them and are comfortable with them."
In his Friday note, Lee discussed new Federal Reserve data that showed US household wealth surging to $142 trillion in the second quarter. With just $46 trillion of that invested in US stocks, some $100 trillion could in theory still be allocated to equities, underscoring how much room stocks have left to run.
He also explained why wealth inequality in America is not as severe as some of the topline numbers suggest - noting that while the top 20 richest Americans were "ridiculously wealthy," they only composed 1.2% of total US wealth.
"This means America has a lot of wealth, flat out, and there are just a lot of mega-rich people," said Lee.