Millennials are responsible for skyrocketing inflation, says strategist


Rising inflation is putting the markets on edge and leading to fears of a recession. This week’s latest consumer price index revealed a sharp 9.1% year-on-year increase in June, prompting Treasury Secretary Janet Yellen to say inflation in the US is “unacceptably high”.

The causes of the steep jumps include high commodity and energy prices due to supply shortages and the Russian war in Ukraine, record amounts of government spending on economic stimulus and low interest rates during the Covid-19 pandemic, and ongoing labor shortages. and supply chain problems associated with increasing demand for.

But one investor argues there’s another major factor to blame: millennials.

“Look, what not everyone is including in the conversation is what really causes inflation, which is too many people with too much money chasing too few goods,” Bill Smead, chief investment officer at Smead Capital Management, told CNBC’s “Squawk Box Europe” on Thursday.

Smead explained that there are an estimated 92 million millennials in the US, mostly aged 27 to 42. “The last time we saw what we call ‘wolverine inflation’ — an inflation that is difficult for policymakers to stop — was when 75 million baby boomers had replaced 44 million silent-generation people by the 1970s.”

“So we have a lot of people in the United States (ages 27 to 42) who put off buying a house, buying a car, about seven years later than most generations,” he said.

“But in the past two years, they’ve all come to the party together, and this is just the beginning of a 10- to 12-year period where there are about 50% more people wanting these things than in the previous group.”

“So the Fed can tighten lending, but it won’t reduce the number of people who want these supplies compared to the previous group,” Smead said.

Burnout was named as one of the top three reasons for younger workers leaving their jobs in the past two years, according to Deloitte’s research.

Tom Werner | Stone | Getty Images

Many millennials would disagree with the idea that they all have a lot of money and are now buying assets – according to a number of surveys conducted in the past two years, more than 60% of millennials are putting off buying a home because of student debt or the simple cost of houses compared to wages. This generation is also the one with the fastest growing debt burden.

Even many of those with enough money are still reluctant. As late as June, the CNBC Millionaire Survey found that millennials are “three times more likely to cut corners on large purchases compared to their baby-boom counterparts.”

44 percent of millennial respondents said higher rates have caused them to put off buying a new home, compared to just 6% of baby boomers. Nearly half of millennial millionaires said they would buy a new home. car delay due to higher rates — more than double the number of baby boomers,” CNBC wrote.

Pressure on the housing market from the pandemic-induced inventory shortage and high competition is also keeping many potential buyers in the late 20s to early 40s age group away.

Largest home buyers’ market by generation

Despite all this, millennials still make up the bulk of the homebuyer market by generation. They are also the largest generation in the US by population.

“Millennials now make up 43% of homebuyers — the largest proportion of any generation — up from 37% last year,” the National Realtors Association found in its latest survey published in March.

The NAR classifies 23- to 31-year-olds as “younger millennials” and 32- to 41-year-olds as “older millennials.”

Eighty-one percent of younger millennials and 48 percent of older millennials were new home buyers, more than other age groups, NAR wrote.

Older millennials made up the “largest generation of buyers” at 25%, and the median age was 36, the study found. The second largest group was Gen Xers at 22% with a median age of 49.

“Some young adults have used the pandemic to their financial advantage by paying off debt and cutting rent costs by moving in with relatives. They are now leaping into ownership of their own homes,” said Jessica Lautz, vice president. -NAR’s president of demographics and behavioral insights. in the report.

The figures still leave many young people out of the picture. According to rental site Apartment List, in 2020, 18% of millennials believed they would pay rent forever, giving up home ownership — nearly double the rate of 10.7% two years earlier.

— Robert Frank of CNBC contributed to this report.

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