We mentioned in our previous article that recovery expectations differ widely across the generations, as reported in the current research of one of our strategic partners, Capital Group’s American Funds. The graph provided, illustrating S&P 500 investment returns during each age group’s working years, provides a context for the generationally specific investment results indicated below.
Capital Group research conducted in January of 2020 reported annual portfolio return expectations by generation¹:
- Gen Z 23%
- Millennials 12%
- Gen X 10%
- Baby boomers 8%
These expectations shifted slightly with the advent of the coronavirus and the anticipation of recovery to follow. Capital Group’s research in March of 2020 showed:
- Gen Z 26%
- Millennials 15%
- Gen X 10%
- Baby boomers 7%
As you can see, both younger generations now anticipate higher investment results than previously. Gen X is unchanged, and Baby boomers predict somewhat lower portfolio results going forward.
What our Entrust Investment Committee believes about recovery
Based upon our research and analysis during this three-month period of crisis, our Entrust Investment Committee perspective is that:
- The process of recovery has begun as evidenced by the gradual reopening of businesses. However, many companies will likely confront unanticipated—and potentially expensive—bumps along the way as a new normal is established.
- Many companies will do business differently moving forward. More employees will work from home. For those who cannot, employers will be mindful of the need to implement protocols to protect workers from illness.
- Innovative companies with resilient systems and technology platforms are likely to drive the recovery and continue to perform well.
For those who resonate to technical market perspective
Schwab’s Chief Global Investment Strategist, Jeff Kleintop, shares three key features of current technical aspects of capital market progress toward recovery:
- Cyclicals typically lead the market higher when stocks rebound from a bear market and recession—but not this time.
- The unusual market leadership (non-cyclicals) could mean the market is sending one of two worrisome messages: we haven’t seen the low yet or the recovery is likely to be very weak.
- If cyclicals begin to lead the market, a rotation to value and international stock market outperformance may catch some investors by surprise.
It may not be surprising that younger generations have the highest expectations indeed regarding the portfolio results they might count on as the recovery from the March of 2020 capital market lows fade from view. It might be reassuring to confirm your recovery perspective, so we welcome the opportunity to have a conversation. Remember that we are available: email@example.com or by phone: 610.687.3515.
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¹Four Generations Chart and Intergenerational research provided by Capital Group/American Funds. 2020