People in Generation Z (born 1997-2012) have taken up investing in a big way. "Younger adults are entering the [investment] market earlier: the share of 25-year-olds in 2024 that used investment accounts was 37 percent, versus 6 percent for 25-year-olds in 2015," says an August report from JPMorganChase. That's a six-fold increase to a record number.
Meanwhile, the National Association of Realtors® reported in April, "This year, the share of Gen Z buyers and sellers aged 18 to 25 made up just 3% of buyers and 2% of sellers."
Earlier this week, The Wall Street Journal added two and two and came up with an article under the headline, Where Have All the Young Home Buyers Gone? Check the Stock Market.
"Owning a home has traditionally been the way for U.S. households to build wealth," said The Journal. "But today’s high property prices mean younger people either can’t afford to get on the property ladder or think they can earn a better return elsewhere."
Is Gen Z Smarter Than Previous Generations?
Throughout time, young people have been given a bad financial reputation by their elders. "The beardless youth… does not foresee what is useful, squandering his money,” wrote Horace in the 1st century BC.
Many slander Gen Z-ers as feckless and irresponsible. But the JPMorganChase report suggests they're way more savvy than they're given credit for.
With homeownership unaffordable for many, especially those just starting their careers, it makes perfect sense to seek other routes to building wealth. Meanwhile, stock investments have been averaging an annual return of 14% in recent years, according to WSJ.
And recent years are all Gen Z-ers have to go on. Many young people are still likely to want to buy their own homes eventually, and may see investing in stocks as a way to turbocharge their down-payment savings.
A Huge Caveat
"The dot-com boom of 1995–2000 (and ultimate bust in 2001–2002) was a period of large, rapid, and ultimately unsustainable increases in the stock market—specifically in the valuation of shares in Internet service and technology companies, then commonly referred to as 'dot-com' companies, including fledgling businesses, or 'start-ups,' with little or no record of profitability or with unrealistic business models," says Encyclopedia Britannica.
The Nasdaq Composite index increased almost sevenfold, from 743 to 5,048, during the bubble. Then came the bust: "Between March 2000 and October 2002, the Nasdaq fell from 5,048 to 1,139, erasing nearly all of its gains during the dot-com bubble," Britannica continues.
The oldest Gen Z-ers were age four or five when that stock market bubble burst. You can't blame them for knowing little about it.
In their experience as young adults, they've only known exceptionally high returns from stocks. But many now believe we're experiencing an AI bubble that could be as bad or worse than the dot-com one.
Is an AI Bubble Almost Upon Us?
We did an online news search for AI bubble stories that ran within the 24 hours before this article was written. Google led with:
- ‘Absolutely' a market bubble: Wall Street sounds the alarm on AI-driven boom as investors go all in— Yahoo! Finance
- Why experts are worried about an AI bubble in the stock market — The Hill
- The Frothiest AI Bubble Is in Energy Stocks — The Wall Street Journal
- 'Of course it's a bubble': AI start-up valuations soar in investor frenzy — The Financial Times
- A soaring stock market led by tech has some likening the AI boom to the dot-com bubble — NBC News
Only one news report highlighted by Google gave an argument against our soon experiencing an AI bubble: "The AI boom isn't a bubble — it's barely begun, Goldman Sachs says," according to Business Insider.
We can hope Goldman is correct and that Gen Z's fortunes don't disappear. We need them to buy homes, afterall.
