I am of course not exactly objective about this topic, but when a major new research report confirms it, that’s a big deal. Baby boomers, it turns out, aren’t quite done making their mark on good old conspicuous consumption.
Turns out we – yes, I’m one of them – may in fact be the best demographic out there when it comes to consumer spending. And those businesses – retailers and vendors alike – that ignore this do so at their own peril. This is not to say millennials and Gen Zers don’t have money to spend in their acquisitional life stage. Millennials continue to buy houses, raise families, and generally occupy the sweet spot in the American demographics pie, while Gen Zers are entering their family formation stages and starting to throw around their purchasing might.
But both groups have oodles of student loans to pay off, they have jobs that may not pay quite what previous generations earned, and they may not be as enthusiastic consumers as their parents…and grandparents.
Boom Boom
The boomers, we all know, generally never met something they didn’t think they needed to buy. All those idealistic values that guided them earlier in their lives — the creation of Earth Day, anti-war protests, rants against corporate America ethics, and general rages against the machine fell by the wayside over the years as the credit card debt, home equity loans and paycheck-to-paycheck existences became more commonplace.
Through it all the value of their homes continued to increase – even after the 2009 housing crash – and the rich pensions that are now a thing of the past made them the last generation to have this guaranteed, built-in nest egg to tap. In fact, when you factor in $72 trillion going directly to boomer heirs, they are sitting on real money.
So, a new recommendation from Bank of America says businesses need to follow the Willie Sutton theory of wealth accumulation. Asked why he robbed banks, the legend says he responded, “That’s where the money is.” BofA is now saying the same thing.
Bloomberg put it best: “Go long on old people stocks” and by association on those businesses that cater to them. “Millennials are really feeling the impact of the hiking(rates) cycle,” said the bank’s quantitative strategist Ohsung Kwon. “Boomers not so much. We’re starting to see a big division between the two.” BofA data, according to the Bloomberg report, shows that boomers and those right before them (the greatest silent generation or whatever you want to call them) “are accounting for the lion’s share of US consumption today. Younger generations are cutting back their spending while their credit card delinquencies go up.
“Pre-pandemic, the empirical evidence was there supporting that boomers are doing better than millennials in regards to investments, retirement accounts and home ownership,” Bloomberg quotes Blanke Schein Wealth Management chief investment officer Robert Schein. “And post-pandemic, that divide, because of higher inflation and elevated interest rates, has gotten dramatically worse. The divide is just gigantic.”
Of course, one needs to drill down a bit to get a more accurate picture. While many boomers are living comfortably on savings, retirement funds and the values of their homes, there are large numbers who are not, subsisting on Social Security and meager pensions. These people are not going on cruises, redoing their kitchens, and traveling to Europe. Boomers, like every generation before and after, have many layers to peel back to get the true story.
Go With the Flow
That said, there are enough boomers with enough money and their life-long spending proclivities to identify consumer spending sectors, including the retail world, that are likely to be beneficiaries. The aforementioned cruises are certainly one of them and numbers from that sector suggest any lingering pandemic hangover has long since disappeared. So too the overall travel business.
In retailing, the BofA report says home improvement companies are likely recipients of some of these boomer bucks as this generation stays in the oversized homes they’ve lived in for decades and now want to fix, perhaps in anticipation of a less mobile lifestyle.
Obviously, the big winners will be companies in the healthcare sector and those that sell just about any product geared to an age-defying user. The bank also says entertainment companies could benefit as will American Express given boomers’ tendencies to charge anything not nailed down.
What’s on their do-not-disturb list? Apparel and fashion companies lead the way as boomers probably have more clothes in their closets than they know what to do with. They are not exactly out there buying loads of new suits or formal wear. And then there are categories like kids’ clothing, toys and gear that may have it both ways. Younger generations may not have the spending power that their predecessors had but grandparents are notorious spoilers of their grandkids and seemingly will make up for any shortfall.
After the Boom
Of course, there is the obvious consideration that boomers aren’t getting any younger and their mortality rates are only headed in one direction. Sooner or later, they will not be spending money because…well, because they won’t be doing much of anything. At that point. the wealth they’ve accumulated will be passed down to their kids and perhaps then the millennials and Zers will start to have their wealth. That’s assuming, of course, that the boomers haven’t spent it all first.