Millennials Lag Previous Generations: Can They Catch Up?

Millennials get a raw deal when it comes to press attention. It seems like hardly a week goes by when millennials aren’t being criticized for being lazy, for wasting their money, or for delaying their entry into adulthood. But could there be a good reason for that?

The millennial generation could be the first generation in US history that can’t expect to be better off than its parents. That’s worrying not just for millennials, but for anyone who cares about the continued economic growth and prosperity of the United States.

There are numerous reasons behind millennials’ economic stagnation, all of which we’ll delve into. But all isn’t hopeless. Millennials still have the ability to better their position, as long as they work hard and make the right decisions.

How Badly Off Are Millennials?

As of right now, millennials control only 4.6% of the nation’s wealth, compared to Baby Boomers who control about 53%, and Gen-Xers who control about 25%. In one sense that’s to be expected, as millennials just haven’t had the time to accumulate wealth like previous generations have. But Baby Boomers had four times the wealth of millennials at the same age. That’s a deficit that’s going to be hard to overcome. So why is this happening?

What Headwinds Are Millennials Facing?

In some ways millennials are victims of circumstance, in the wrong place at the wrong time. The number of headwinds they are facing will make it difficult for them to make headway.

1. Weak Stock Markets

Baby boomers had the good fortune to invest in the best stock bull market in US history, the bull market of 1982-2000. With average annualized gains of 17% during that time period, it was a time that buoyed the investments and retirement accounts of millions of Americans. But with stock markets only averaging about 5% annualized gains since then, the past two decades have been a much harder road.

Even Gen-Xers had good chances to build up their wealth during the tail end of the bull market and the dotcom boom. Millennials haven’t had nearly that kind of opportunity, and there’s a good chance that they may never see the type of stock market growth that their parents did.

While stock markets have done well since 2016, there are increasing fears that we’re on the verge of a catastrophic collapse. More and more analysts and market observers are pointing to a massive stock market bubble, with stocks overvalued in just about every way possible. Those jumping into the stock market today could very well get left holding the bag when markets collapse.

2. Loose Monetary Policy

Ever since the 2008 financial crisis, monetary policy can best be described as extraordinarily loose. From around $800 billion before the crisis, the Federal Reserve’s balance sheet has exploded to over $7 trillion today. And with the federal government determined to spend trillions more dollars each year, that sum will likely only continue to increase. We can’t even rule out an increase to $10 trillion this year, as the government is going full throttle with stimulus spending that the Fed will have to soak up.

Unlike 2008, the Fed isn’t neutralizing much of this inflow of money into the financial system, causing money supply numbers to skyrocket. The Fed is intent on allowing inflation to rise, but who’s to say that the Fed will be able to tame inflation if numbers get too high? The Fed is playing with fire, and millennials who already are facing a rising cost of living could end up getting burned.

3. Mountains of Debt

Debt is omnipresent in our society, with more and more debt being issued each day. Millennials are indebted like no other generation before, starting with the massive amounts of student loans they have taken out to get their college degrees. That has them starting out their careers with one hand already tied behind their backs. Add in the higher cost of housing, food, and transportation, and it’s no wonder many millennials are living paycheck to paycheck and wondering if they’ll ever get married, have children, or buy a house.

4. Poor Investing Environment

The past decade hasn’t been a great one for many investors. In the aftermath of the 2008 crisis, the number of solid investment assets was pretty minimal. Even once stock markets began to recover, it was slow and halting. It was really only in the past 4-5 years that stock markets have begun to grow, and even then, the number of major drops has boggled the mind.

Is it any wonder that millennials, who already don’t have much money, are hesitant about investing what little they have in a market that could crash at any time? Yes, long-term investing may be the best way to build up wealth, but with millennials already having seen the dotcom bubble burst, then the 2008 financial crisis hit, and now seeing yet another oncoming crisis, can you blame them for wanting to live in the moment and not put their assets at risk of loss?

Can Millennials Dig Themselves Out of a Hole?

None of this looks good for millennials, but just because it’s bad now doesn’t mean it has to stay that way. After all, those who invested in stocks between 1966 and 1982 would have been pulling their hair out after seeing how stocks moved during that time period. And in 1982 most people probably had no idea how the next 18 years would work out.

Predicting the future is obviously impossible, but investors today can look ahead to the next decade or two and see what the future might hold. As we’ve seen above, with overvalued stocks, high debt levels throughout the economy, and an investment environment that looks more likely to see negative returns in coming years than positive ones, investors will have their work cut out for them.

Thankfully, there are assets that can provide investors with significant returns even during times of economic weakness. Among those are gold and silver, which have strong and well-earned reputations for growing in price when other assets are falling in price.

During the 2008 crisis, for instance, gold gained 25% during the same time period that stock markets lost more than 50% of their wealth. And from their lows in 2008 to their highs in 2011, gold nearly tripled in price while silver more than quintupled, more than outpacing the recovery of stock markets.

Gold and silver already made great runs in 2020, and the outlook for 2021 remains bullish. With an economy that’s running on fumes, a government that is spending like a drunken sailor, and stock markets in a clear bubble, gold and silver should have plenty of room to run. That’s even after gold gained 25% last year and silver gained 48%. Gains of even half those numbers would thrill many investors.

With millennials in a position far different from that of their parents and previous generations, they may have to start thinking about investing in a different light, and thinking in investing in different types of assets. With the prospects for gold and silver looking very strong in the coming years, investing in gold and silver may be just the ticket for millennials looking to build their wealth in both the short run and the long term.