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MILLENNIALS - The Next Wave
WHO ARE MILLENNIALS? Squeezed between Gen X (36-54) and Gen Z (everyone below 25), Millennials (25-35) count luminaries like Mark Zuckerberg, Beyonce, Ivanka Trump and an impressive array of female entrepreneurs; Miki Agrawal, Alice Brooks, Amber Venz, Elizabeth Holmes etc., amongst themselves, and are the second largest generation in the US today (after Boomers), at 73 million and 24 percent of the US population. www.pewsocialtrends.org
POWERFUL DEMOGRAPHIC With an annual purchasing power of $600 billion (US & World News 2019 Consumer Shopping Trends and Stats by Generation), Millennials are a force to be reckoned with. Marketers realize this and gear efforts to appeal to this demographics' specific economic and personal interests, and have honed their tactics to accommodate Millennials' life outlooks and economic purchases. A TOUGH START It was a rough start coming of age after 9/11, the economic recession of 2008 and even now facing the Corona virus pandemic. "When you begin your life underpaid and underemployed it can have a lifelong impact on your earning power." www.cobank.com Overcoming these obstacles (while simultaneously carrying a heavy educational debt), may be reflected in the fact that as a group Millennials are slower to marry and start their own households than prior generations. In fact many still live at home well into their '30's. A UNIQUE GROUP It's also true, however, that Millennials are the most educated and most diverse demographic with growth, not from birthrate like Boomers, but rather first and second-generation immigrants. Millennial women, like Gen X, are also more likely to participate in the workforce than earlier generations. www.cobank.com TRANSFER OF WEALTH UPCOMING Despite a tough start Millennials stand to inherit upwards of $24 trillion from Baby Boomers and older generations so businesses should "watch out" for this demographic as they absorb this huge current and future wealth transfer. www.cnbc.com WHERE THEY SHOP Marketers are gearing their efforts to appeal to this demographic, according to Consumer Shopping Trends and Statistics. In this report they note that social media usage is strong in this group and they enjoy interacting with brands on line and using social platforms like Facebook, Instagram and Pinterest as their most trusted brands for customer service. Millennials tend to spend more on retail, in store and online equally, than other generations (US News & World Report.) About 75% of Gen Z and Millennials use smartphones to shop online - more than any other generation. As an interesting aside, Chinese Millennials are luxury brands' biggest consumers, having none of the debt of their US Millennial counterparts have. In fact the differences don't end there. They are also home owners and loaded with cash. www.wsj.com
Interestingly enough, it is environmental, social, governance (ESG) issues that most influence where Millennials spend their money, according to the head of ESG governance at PR firm Edelman. They are more militant about ESG issues and where they invest their money, including savings and pensions. A phenomonon noted by Edelman over two decades of study is that people will punish companies they do not think are doing the right thing. This behavior may not be solely confined to Millennials but the pandemic has only heightened this trend whereby investors want a company to protect the well-being and financial security of their employees and suppliers, even if it means suffering financial loss.
That ESG portfolios have outperformed the wider stock market during Corona virus fueled sell offs only highlights this phenomenon. www.cnbc.com
CAIM's PORTFOLIO MILLENNIAL THEMES The markets of late have made it very difficult to think about the long term. But history and years of experience have taught us when we take our "eye off the ball" we lose sight of the long term potential offered by the market. Our stock selection process is focused on financial strength, but we know that when we combine that factor with secular market themes, and a focus on ESG, the value proposition of our stocks is recognized over the long term. Overall, our portfolio has an ESG score above the SP 500. While the overall score is important, we also look for companies that are focused on making an impact in society. This is not always reflected in the ESG score but we believe will lead to higher scores and therefore higher stock prices. Many of the stocks in our portfolio capture the themes of Millennials: Home Depot (HD) focuses on the growth in home ownership of this group. VF Corp (VFC) is a retail company with a strong online presence with brands like Vans and Northface that appeal to this group. The company is also very focused on the quality and ethics of its' supply chain. General Motors (GM) is transitioning all its' vehicles to electric, which is an attractive theme to Millennials. Intel (INTC), Cisco (CSCO) are involved in all aspects of the nuts and bolts of the internet including 5G, which will help the increasing numbers of people who will work from home. NextEra (NEE) is a Florida utility with a focus on solar energy. | 
