It has long been a media trope that the millennial generation is, at best, a great annoyance to the rest of the adult population and, at worst, a destroyer of beloved American institutions, from marriage to homeownership.
However, with the oldest millennial cohort quickly approaching 40 years-old, the generation is no longer a newcomer on the fringes of American business. In fact, the group is the major reason for the “impressive resilience of the U.S. economy,” as evidenced by the surprisingly strong November jobs report, Tom Lee, head of research at Fundstrat Global Advisors, wrote in a Monday note to clients.
Lee, who defines the millennial generation as those born between the years 1981 and 2000, said that this cohort, who are largely the children of the baby-boom generation, now represent the largest cross-section of the U.S. population.
“We have asserted that the U.S. is increasingly decoupling from the rest of the world because of building demographic tailwinds,” Lee wrote. “In short, we can thank millennials, who are now entering their prime income years. (Or we can thank their parents for having lots of children).”
Lee wrote that those aged 30-49 are the most important contributors to economic growth because they tend to consistently take out more debt, see their incomes grow and purchase expensive cars, houses, as well as spending hefty sums raising children. The millennial contingent is seemingly on the cusp of aging into that age group.
And unlike much of the rest of the world, the U.S. is projected to see the total population of this age group rise for the next decade.
Compared with other major economies, including Europe, China and Japan, the U.S. economy’s demographic tailwinds appear even more powerful, he wrote, as the following chart illustrates.
The U.S. millennial tailwind is just at its infancy. In a previous research note, Lee wrote that, “The oldest millennials are 36, but the average age is 26.5…this means the peak of millennials are driving the automobile market but just beginning to impact the housing market.”
All of this is good news for the U.S. economy, and the stock market as well, given that stock market peaks tend to coincide with generational ones, Lee said.
