A Stock Market Outlook for the Generations

What next for markets after a year like none seen in a generation? Investors from BlackRock Fundamental Equities sat down to discuss the outlook for inflation, the growth and value investing styles, and key industries.

In the most recent episode of BlackRock Fundamental Equities’ Expert to Expert series, three active equity investors discussed the dynamics weighing on markets, their view on growth and value stocks, and the outlook for the energy and technology sectors. They related stories of their own experience and reflected on findings from a recent investor survey. We capture elements of their conversation here.

More time, more optimism?

In a year when it was easy to be a pessimist, a BlackRock Fundamental Equities poll of over 1,000 U.S. individual investors revealed potential hints of optimism ― along with some interesting variance in sentiment by generation. Millennials were more comfortable increasing equity allocations this year, with 45% of those surveyed in May revealing they added to their exposure, well above both Gen Xers (25%) and Boomers (11%). And 49% of Millennials saw themselves adding more in the ensuing six months.

Caroline Bottinelli, a Research Analyst and Portfolio Manager on the U.S. Growth team, sees two dynamics at play. The first was shorter memory, which potentially translated into less fear:

“Investors of my generation haven't seen a period of sustained high inflation in their lifetimes, as the forces of globalization and technology and demographics have put downward pressure on inflation and rates over the past 40 years.” This, Ms. Bottinelli suggests, may have younger investors more inclined to believe the Fed will pivot away from rate hikes, which would be positive for equities.

The second factor: Acknowledgement of a longer investment horizon, meaning more time to recoup losses and compound earnings, which Ms. Bottinelli notes is the real driver of returns over the long haul. “And we know that missing out on just a handful of the best days in the market can significantly negatively impact those returns,” she says, espousing the wisdom of “time in, not timing” the market.