The United States is set to outpace other major developed economies of the world when it comes to the average age of America’s working class. While economies such as Japan and Europe reel under the pressure of the ageing population, the United States is experiencing a boom in millennial population, the largest percentage of America’s current workforce.
Furthermore, as Baby Boomers move toward retirement, the millennial and Gen Z cohort is set to boost America’s economy by adding the power of the youth to its workforce. Changing consumption patterns, increased productivity, higher wages and more number of houses to be built should propel U.S. economic growth in the years to come.
As it stands currently, the millennials have matched the Baby Boomers in terms of their influence on the economy. This is evident from the fact that consumption patterns across the United States have changed dramatically over the past decade. A similar impact would be made by the Gen Z, the population born between 1997 and 2012, by 2030s, when the current leading generational cohort moves toward their middle age.
Moreover, U.S. consumer confidence remains high and the job market is robust. Under such conditions, investing in stocks from real estate, consumer discretionary and airline sectors seems prudent. Such sectors are directly impacted from a shift toward leisure spending.
Growth in Millennial Population Will Impact Consumption Pattern
Per a report published by Morgan Stanley (MS) on Jan 25, 2019, average consumption levels in the country would increase to 2.5% in the 2030s from just 1.7% in the past year. This would be due to the resultant impact from a change in the demographics of the United States over the next few years.
Further, the report also throws light on the fact that increased discretionary spending by the younger population would boost consumer spending and therefore overall U.S. GDP. Moreover, this would more than make up for the decline in consumer spending by the Baby Boomers who would by then be well nearing their 80s and contributing to increased healthcare expenditure.
Sectors to Benefit From Healthy Consumption
It is a well known fact that while the Baby Boomers preferred living with families, millennials have a preference toward renting single-family homes. This is because they increasingly move out of their cities in search of better jobs and standards of living. The real estate investment trusts stand to benefit the most from such developments as they can provide single-family rented homes.
Better pay checks also lead to spending on leisure activities such as fine dining and entertainment. The space will witness a revolution in the days to come as millennials are likely to spend their disposable income on such products and services.
Needless to say, airlines, hotels and lodging would also benefit greatly from such improving conditions. As a matter of fact, even the retirees spend their savings on grand vacations. This will favorably impact air travel as well hotel industries.
Finally, younger people spend lavishly on stylish clothes and accessories. While the baby boomers are likely to spend less on apparels as they age, millennials and Gen Z would continue spending more and supporting gains for the space.
5 Best Picks
As America’s workforce remains relatively young compared to other major economies of the world, the country stands to gain. Further, a boom in young population, in the form of millennials and the Gen Z, has positively impacted the consumer spending. Stocks from the consumer discretionary sector, the real estate space, airlines as well as apparels will gain significantly from changing consumption patterns.
In this context, we have selected five stocks that are expected to gain from these factors. These stocks carry a Zacks Rank #1 (Strong Buy) or 2 (Buy). For each of these stocks, the price-to-earnings ratio (P/E) is lesser than the industry average. You can see the complete list of today’s Zacks #1 Rank stocks here.
Lululemon Athletica Inc. LULU designs, distributes and retails athletic apparel and accessories for women, men and female youth.
The company is based out of Vancouver, BC and carries a Zacks Rank #1. The expected earnings growth rate for the current year is 21.49%. The Zacks Consensus Estimate for the current year has improved 6.4% over the past 60 days.
SkyWest, Inc. SKYW is a provider of scheduled passenger and air freight services.
The company is based out of St. George, UT and sports a Zacks Rank #1. The expected earnings growth rate for the current year is 14.98%. The Zacks Consensus Estimate for the current year has improved 5.4% over the past 60 days.
Wyndham Destinations, Inc. WYND operates as a hospitality company. It offers hotel management and vacation exchange and rental services.
The company is based out of Orlando, FL and carries a Zacks Rank #2. The expected earnings growth rate for the current year is 14.96%. The Zacks Consensus Estimate for the current year has improved 1.3% over the past 60 days.
M/I Homes, Inc. MHO operates as a builder of single-family homes in Ohio, Indiana, Illinois, Minnesota, Maryland, Virginia, North Carolina, Florida, and Texas.
The company is based out of Columbus, OH and sports a Zacks Rank #2. The expected earnings growth rate for the current year is 5.68%. The Zacks Consensus Estimate for the current year has improved 2.1% over the past 60 days.
IMAX Corp. IMAX operates as an entertainment technology company that specializes in motion picture technologies and presentations worldwide.
The company is based out of Mississauga, ON and carries a Zacks Rank #1. The expected earnings growth rate for the current year is 26.37%. The Zacks Consensus Estimate for the current year has improved 5.5% over the past 60 days.
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