This summer is going to be an interesting way to check America’s financial pulse, given that we have a new administration regulating monetary policy, and the American public as a whole has experienced many upheavals due new leadership.
While it’s difficult to predict with total accuracy which trends will drive Wall Street this summer, the following three trends have solidified over the spring – and look to be major contenders in Wall Street performance.
Trend #1: Baby Boomers are Getting Older
Investors come in all shapes, sizes, and ages today – but the bulk of the group has never looked older. What does this mean for investments?
Older adults have more money to put into stocks compared to those who are younger and focusing more on making ends meet. This is going to matter more than ever.
For a long time, money market funds were largely driven by baby boomers, or those born between the 1940s to the 1960s. That said, those born in the ‘40s are now in their late 70s, while those born in the ‘60s are approaching their 60s.
This is the time in life when an older person’s needs change. They’re probably going to retire, which may mean stretching their money. These baby boomers may pull out their money market funds to pay for their retirement.
Stocks are an alternative, but fewer baby boomers invest in these compared to money market funds due to the unreliability of stocks. For that reason, stocks may appeal more to millennials, the up-and-coming generation that will surely shape Wall Street further in the years to come.
Financial experts agree the gradual fading out of the baby boomer generation won’t be anything close to detrimental.
Trend #2: Increasing Debt of Various Ages
Americans are dealing with a tremendous amount of debt. According to a 2010 McKinsey Report, that debt can be broken down into two categories: debt that Americans had before the Great Recession (which in turn may have led to such a recession), and debt Americans had after the Great Recession.
Debt, no matter its age, hurts the economy over time. The more that people are focused on paying off their debt, the less they’re spending on investments. It can sometimes take years to pay back debt, meaning this could be an ongoing trend.
In the case of older debt, the years of interest make it more difficult to pay off. New debt may be ignored in favor of those older bills. Debt also affects Americans of all ages, from millennials grappling with mounting student loan debts to older adults still paying off old credit cards.
The McKinsey Report explains the impact thusly: “Seven years after the bursting of a global credit bubble resulted in the worst financial crisis since the Great Depression, debt continues to grow…In fact, rather than reducing indebtedness, or de-leveraging, all major economies today have higher levels of borrowing relative to GDP than they did in 2007. Global debt in these years has grown by $57 trillion, raising the ratio of debt to GDP by 17 percentage points. That poses new risks to financial stability and may undermine global economic growth.”
Although this report was published several years ago, those points still stand today.
Trend #3: Bitcoin Prices Increase
It may have seemed like Bitcoin, the most popular cryptocurrency, disappeared for a while, but it is staging a comeback in a massive way. Compared to March 2017’s value, the price is now twice that for summer, jumping beyond the $2,000 marker.
While this is great news for those who were smart enough to take stock in Bitcoin years ago, the fact remains that many Americans are still confused about how cryptocurrencies work. Meanwhile, those who do have a better understanding are dubious about whether it will ever be accepted as a legitimate form of currency – are are often skeptical regarding its volatility.
A report published by Brown Brothers Harriman lambasted Bitcoin.
“They are currencies to the extent that contacts on Facebook are friends, and the ‘grande’ means medium size at Starbucks,” the company stated in layman’s terms.
Before buying a stock in Bitcoin, know the facts. The currency experienced a resurgence recently, which may have added to its growing stock value. The U.S. Securities and Exchange Commission contemplated the legalities of crytpocurrencies several months ago, while Japan decided to embrace the form of currency.
Winning in Wall Street this summer ultimately means staying informed, doing your own homework, and not being afraid to let go of stocks when they’ve proven to be too unreliable. However, considering the significant changes presented by America’s new political leadership, be prepared to take extra time to understand just exactly what market fluctuations mean.
Regards,
Ethan Warrick
Editor
Wealth Authority
