Boomers and Millennials are driving the stock market, just as they have post-WWII into the present day. It bears repeating, the wave that ended the boomer expansion is now shifting to the millennial generation, our kids. As this larger generation graduate college, they will take on new jobs, get married, have kids of their own, buy new cars and homes, which in turn will drive consumption and multiple expansion similar to previous cycles.
From the Washington Post, January 27, 2019.
“The Big Number: Millennials to overtake boomers in 2019 as largest U.S. population group”
In 2019 the millennial generation, those born from 1981 to 1996 — will overtake baby boomers as the largest adult population group in the United States, according to government data analyzed by the Pew Research Center. The number of millennials is projected to reach 73 million, aided in part by immigration, while the boomer population, born from 1946 to 1964, is expected to decline to 72 million this year as members die off. Boomers (the only generation officially bestowed a name by the Census Bureau) peaked in size at nearly 79 million in 1999.
Millennials and the Stock Market
Chris Ciovacco and one or two talking heads on CNBC have discussed multiple expansion recently. All of this is related to the millennial generation, and the anticipated impact they will have on the stock market. Chris covered this topic on his youtube channel.
The boomer cycle set the stock market on another bullish trajectory. Price multiples expanded. Those waves are clearly defined as multiple expansion, and higher PEs, led to higher asset prices. All of this happened while baffling the bears that were looking for a major pullback.
“If you waited for a lower number, it never came.”
S&P 500 Multiple Expansion
Are we entering a period like 1988 ~ 2000? Study the chart and its nuances as there are multiple reasons to be excited about the future.
The advance-decline line continues to print new highs. Stochastic is embedded (suggesting extreme strength), RSI is breaking a downtrend as price action breaks out. PPO has crossed in a bullish cycle. And, the bond stock ratio in the lower panel is dropping, which suggests equities are favored over fixed-income assets like bonds (UST).
While the current breakout is short-term overheated, price action remains strong. If you like many others are trying to call a top, we would suggest watching the number of stocks breaking on a daily basis. A big change here would signal short-term weakness.
We use MarketSmith to monitor these changes in 52-week highs.
I plan to expand on this subject, so stay tuned and subscribe.
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