Since the housing market crash of 2008, which sent the U.S. economy into a recession, millennials are distrustful of traditional investments. Experts are predicting that the U.S. economy is due for another market correction at its current state. As millennials gain more spending power and wealth, it is up to them where they will park their money.
The Bubble Must Burst
Recently, reports indicate that U.S. household wealth has surged passed the $100 trillion mark. What caused the rapid increase? Its traced back to the rise of stocks and properties which have been doing unbelievably well recently. However, experts are predicting that this trend should raise red flags and that this growth is unsustainable.
The U.S. household wealth reached its record-breaking mark in September. What appears at first glance to be a positive for the economy, however, it is terrible for the long-term. For example, Russ Mould, investment director for AJ Bell, believes that we are due for another 2008.
“Household net worth cannot sustainably grow this much faster than incomes. Assets have been bid up and at some stage there has to be chance that they correct, just as happened in 2000 and 2007,” said Russ Mould.
Mould has reason to believe that the U.S. stock market is experiencing one of the strongest bull markets in history. As for the real estate market, the value of homes continues to increase in value which led to the sudden increase in household wealth. Unfortunately, the market is vulnerable to a correction due to the lack of stable income to complement household wealth.
“The difference is likely to be accounted for by the surge in the value of financial and other assets – equities, bonds, property and rankly everything from vintage cars to art to wine to baseball cards. And this is one warning that at some stage another collapse in financial markets will sweep around the globe,” stated Mould.
Staying Ahead of the Masses
Mould is not alone with his prediction about the stability of the U.S. markets. Nouriel Roubini, a professor at Stern School and renown economist, agrees with Mould’s predictions. Roubini is expecting a financial crisis to occur by the year 2020. He has noticed the U.S. markets have been displaying red flags indicating a bubble for the past year.
One of the biggest indicators of bubble-like behavior is the U.S. household wealth and income value growing to record heights. As well as the global debt, which is rising to the $250 trillion mark. Furthermore, Roubini is unsure whether the correction will be minor or an all-out financial crisis.
The housing market is often considered one of the safest investments one can make. However, the aftermath of 2008 has left a generation to believe otherwise. Millennials are looking into new avenues of investing such as cryptocurrencies.
For example, Bitcoin is widely popular among younger generations, especially among millennials. Bitcoin was born out of the 2008 recession and is an excellent store of value, disconnected from the broader financial market. The value of Bitcoin moves independently of traditional commodities and assets. Allowing it to be a reliable store of value during times of uncertainty.
There Exist No Guarantees
However, do not be so quick to believe that Bitcoin will experience a bull market if the global market experiences a decline. There is no correlation between the broad financial market and Bitcoin. For example, Matt Hougan, vice president of research and development at Bitwise Asset Management, had explained to Bloomberg in an interview that there are no guarantees of bull markets in crypto.
“Non-correlation is not the same as inverse correlation so there’s no guarantee that when the market goes down crypto will go up. Over the long term, we think the fundamental drivers of crypto are different from the fundamental driver of equities and other assets, and we would expect the low correlation to persist,” said Hougan.
Despite this, it appears millennials are putting their trust in financial technology. Putting crypto before the big banks and investment firms. According to recent surveys, over a third of millennials are interested or planning to invest in cryptocurrency over the next few years. 80 percent of American millennials are currently aware of Bitcoin.