Tobias Levkovich: Next Bull Market May Depend on Net Generation

Tobias Levkovich, a Citigroup Inc. equity strategist, recently opined that the next bull market in U.S. stocks may very well hinge on the "Net Generation", which consists of Americans born between 1977 and 1995.

Levkovich says that the "Net Generation" will be entering their peak time for "saving and investing" over the next three to four years, and that their inflows are likely to exceed withdrawals from baby boomers.

Levkovich points to the fact that there are 71.8 million of the "Net Generation" in the United States, versus 75.9 million of the "Baby Boomer" generation.

While I don't doubt that there will be a bull market over the next few decades, I really don't believe that it will come even close to the ferocity of the bull markets that we witnessed in the 80s and 90s.

Why?

1. The "Net Generation" is swimming in debt. Paying back hefty student loans and tackling mounting credit card debt will be the first priority of the "Net Generation" once they start to make decent salaries - I don't expect them to be investing with the same vigor as the generation before them, at least not for a long while.

2. Distrust of the markets. Many people simply don't believe that the markets are a safe place to invest their hard-earned savings at the moment, due to all of the shenanigans of the past few years. Will this suddenly change? Probably not - it is going to take a long while to restore the trust that the markets have lost over the past few years.

3. Real estate as the preferred investment. This kind of ties in with number two - I believe that the "Net Generation" will largely eschew the stock market in favor of investing in real estate. If they do invest, I believe that many will stick to "safer" invests such as bonds.

4. The prospects of an unstable and mortally wounded economy for the foreseeable future. Let's be real - the economy has taken an absolute beating over the past few years, and is going to take years (and possible longer) to fix. In the meantime, there will be uncertainty over job prospects. Who is going to invest in that environment?

5. A debt-laden society. Somebody is going to have to pay for this spiraling debt load that the United States government is taking on, not to mention a woefully underfunded Medicaid and social security system.

The "Net Generation" faces a number of challenges. This isn't to say that the "Baby Boomers" didn't face challenges as well, but I have a sneaking suspicion that the younger generation won't be as eager (or able) to plow money in the markets as the "Baby Boomers" were.

Maybe I'm wrong. What do you think? I'd be especially interested to hear from those in the "Net Generation"..

Filed under: General Market News