The stock market is taking on a deepening red hue as steep sell-offs continue, but a new report says some younger retail investors are seeing red meat for ‘buys.’
Fewer than two in ten people, 18%, say they feel optimistic enough to put more money in the market this year, according to a Bankrate survey released Thursday.
But a closer look into exactly who’s ready to put more money in the market — and see red meat rather than just red — reveals they skew younger, and by a lot.
“A closer look into exactly who’s ready to put more money in the market reveals they skew a lot younger.”
Some 43% of investors who said they’re ready to increase their investments (43%) are ages 18 to 25. More than a quarter, 27%, were millennials ages 26 to 41.
But only14% of investors ages 41 to 57, the so-called Gen X demographic, said they’d pour more money in and 16% of that demographic said they’d invest less.
Meanwhile, just 8% of baby boomers, ages 58 to 76, said they were likely to invest more in the market this year and 22% said they’d be investing less.
Younger poll participants were also more likely to say they were actively making moves in response to the market volatility.
But there’s one big caveat.
The new survey was fielded a month ago — before Wednesday’s stock-market rout where the Dow Jones Industrial Average
finished with a 1,164.52-point plummet, or 3.6%, in the face of inflation jitters.
The S&P 500
finished down 165.17 points on Wednesday. That’s a 4% decline — and it’s possible fraction of what’s to come, according to an analyst who’s forecasting the potential for the S&P 500 to take a 45% cruel summer skid from a January peak.
“‘We begin to notice a widening gap in sentiment between the younger (more aggressive) and the older (wealthier) generation.’”
— Vanda Research
The Bankrate survey echoes what others are seeing.
“We begin to notice a widening gap in sentiment between the younger (more aggressive) and the older (wealthier) generation,” according to a note Wednesday from Vanda Research, an independent research company offering investment analysis to institutional investors.
The firm’s data signals “the former continues resorting to leverage to buy the dip, whilst the latter has been selling equities primarily via mutual funds,” the note said.
The researchers added “we are now seeing growing signs that wealthier and older individual investors are reducing their overall risk exposure to both equities and bonds.”
It’s understandable why younger investor may be ratcheting up the risk despite all the volatility and talk of recession. After all, their portfolios have more time to recover from deeper bottoms and more time to profit off the bounce back.
“Gen Z and millennial investors’ portfolios have more time to recover from deeper bottoms and more time to profit off the bounce back.”
— Greg McBride, Bankrate.com’s chief financial analyst
“Gen Z and millennial investors willing to invest more in stocks this year, despite market volatility and inflation, can see greater long-term reward for the discipline of hanging on and buying more at lower price points,” said Greg McBride, Bankrate.com’s chief financial analyst.
But they’ll have to stay disciplined in what could be their first real down-market test, especially if they just started getting a taste for investing during the pandemic. (Some say they are up for the challenge.)
On the other hand, McBride said baby boomer investors “are nearly three times as likely to invest less in stocks this year, rather than more, as compared to last year but this is entirely consistent with dialing back portfolio risk as retirement looms, begins, or continues, regardless of the overall market environment.”
“ Just when investors think they’ve bought the dip and are poised for a rebound, another bottom could be right around the corner.”
Whatever the age group, financial advisers say the best investment moves right now are gradual and thought-out, not quick and reactive.
Another tip? If a person’s eyeing a particular falling stock, they have to ask themselves if the share price is falling because of problems particular to the company that can be controlled, Jeremy Bohne of Paceline Wealth Management in Boston, Mass, told MarketWatch.
But if it’s general investor mood that’s dragging the price down, the bargain-hunting investor has to fight market sentiment on a broader scale, he said.
Be warned: Just when investors think they’ve successfully bought the dip and are poised for a rebound, another bottom could be right around the corner.