Fewer young people say they invest in the market than a year ago

The S&P 500 has recently recovered half of the drop from its peak in early January, and some fund managers seem less pessimistic about the consequences of inflation and rising interest rates on the market.

But if the comeback has legs, a new survey indicates that many young investors and those with lower incomes will watch the rebound from the sidelines – mainly due to the rising cost of living over the last 12 years. month.

According to a Morning Consult study published on Tuesday, fewer people say they are investing in the market than a year ago.

About half (49%) of Gen Z adults, ages 18-25, said they had at least one investment product in July 2022, up from nearly 60% at the same time last year. For millennials, aged 26 to 41, that share fell to 57% from 70% last year.

Meanwhile, Gen Xers, ages 42-57, with at least one investment product fell from 56% to 60%. Among baby boomers aged 58 to 76, two-thirds said they had at least one investment, up from 61% a year ago.

On Tuesday, the Dow Jones Industrial Average DJIA,
+0.71%
and the S&P 500 SPX,
+0.19%
were slightly higher while the Nasdaq Composite COMP,
-0.19%
was treading water. Last week, the Nasdaq broke out of bear market territory, a drop of at least 20% from a recent high.

The pool of investors risks becoming “more and more homogeneous” – or older and wealthier – said Charlotte Principato, financial services analyst at Morning Consult. “There are signs that this shift is already underway,” she added.

With rents and childcare prices continuing to rise at a breakneck pace, the data may suggest that many young people may not be able to save as much for their long-term investments.

More than a third of individual investors had annual incomes of up to $50,000. Last year, a greater proportion of individual investors — 4 in 10 — had annual incomes below the $50,000 threshold, according to data from Morning Consult.

Across all demographics, the shares of people using brokerage accounts, managed investment accounts and robo-advisors also fell from July 2021 to June 2022, according to the survey of 6,600 people collectively this year. and the last.

This does not mean that there is a general cooling of stock market investments. According to a recent Bankrate.com survey, a quarter of respondents said the stock market is the best place to stash money they won’t need for a decade.

But with rents and child care prices continuing to rise at a breakneck pace, the data may suggest that many young people may not be able to save as much for their long-term investments.

July’s consumer price index – up 8.5% on the year – was cooler than previous months, but around half (53%) of people said they had extra money to spare. the end of the month in June, compared to 61% a year ago, in the morning View data shown.

Middle-income and younger households have mostly been squeezed by rising rents. Rents saw a 3-month average annualized increase of 7.3%, the fastest clip since 1990.

Middle-income and younger households have mostly been squeezed by rising rents, according to research from Bank of America BAC. Rents have seen an average annualized increase of 7.3% over three months – the fastest clip since 1990.

Property prices, although showing signs of slowing, are out of reach for many people. Childcare costs are another drag on families expected to return to in-person work now that the worst days of the COVID-19 pandemic appear to be behind us.

In the second quarter, Robinhood reported that its monthly active users fell from 1.9 million to 14 million from the previous quarter. That’s “primarily due to declining market asset valuations,” the company noted in its quarterly results.

Robinhood users have faced high inflation, high interest rates and challenging environments for stocks and cryptocurrency, Robinhood CEO and co-founder Vladimir Tenev said during a call for second quarter results.

“And all of that translates into less money to spend and therefore less to save and invest,” he said, according to a transcript of the Aug. 4 call provided by FactSet, which was released the day even where he planned to cut staff by 23%.

But Tenev sounded optimistic later in the call, adding that he thinks many of these young clients who are still early in their investment journey “will end up doing pretty well.”

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