Millennials going “mad on stocks” could actually put the market at risk, leading money experts told Switzer Daily.
According to Switzer Financial Group, “millennial madness” is the reason for recent ASX and US stock market increases in the face of the COVID-19 crisis.
“This oddity is explained by professional fund managers as the silly behaviour of millennials as they get too engrossed in the stock market,” said Switzer Financial Group founder Peter Switzer.
So, millennials are being blamed for current global stock market volatility, but is it a well-founded judgement?
A 2019 Calastone study showed that only 10 per cent of Australian millennials invest in funds, but more than three-quarters of those surveyed said they did plan to invest in the future.
“Before it was the Belgian dentists. Then it was the New York taxi driver that you got your stock tips from. Now it’s the millennials, the traders,” said Pengana Capital’s Rhett Kessler.
“And it’s rampant. Everybody is having a punt. And I can tell you that share prices do not represent underlying fundamentals in a lot of cases. And so my concern is that we’re getting positive validation that everything is fine and it’s a new world, and this time it’s different, and it’s scaring the hell out of me.
“This is not a time for embracing risk, this is a time for caution. And it’s made a lot harder by the fact that if you’re sitting in cash, you’re getting nothing and you’re watching everybody making money around you and it’s a very difficult time to retain your discipline. But I would say that it’s probably more important now than ever.
“These are uncertain times and I hope that I am proven wrong.”
Mr Kessler cited the lack of sports betting as a reason so many are taking a punt on the market right now.
“Term deposits are hopeless. People can’t buy homes. So, they’re looking to the stock market as an alternative to build wealth,” Mr Switzer said of the newfound stock market appeal.
“So long as they don’t have to sell, they can hang in there until fundamentals improve and economies grow. But if they are desperate to get out and are afraid of capital loss then we could see a significant sell off.”
Roger Montgomery, of Montgomery Investment Management, agrees that millennials may be responsible for current market swings and could also be responsible for its downfall, saying there are too many uninformed traders speculating and punting on the market right now.
Have you been taking a punt on the stock market during the pandemic?
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