Sitting on a giant wealth pile, baby boomers may be ready to throw some of that Wall Street’s way.
That is according to independent research company Vanda Research, whose latest weekly data tracker showed individual investors returning to stocks sooner than expected after a bruising February. And at the head of the pack were Americans born between 1946 and 1964, Vanda Research said.
“Boomers were purchasing more bonds than equities throughout 2020, while millennials were buying stocks aggressively. The older investors started to be engaged again with the equity market only toward the end of last year (Nov. 2020) and their activity peaked this month. It is the first time that we see boomers leading the equity inflows,” said Giacomo Pierantoni, research analyst at Vanda, in emailed comments.
Since mid-February, individual investors underperformed the
by 11%, according to VandaTrack, which provides daily data on individual investors’ net purchases of U.S. stocks exchange-traded funds. The analysts expected to see that followed by a period of hibernation for those investors. Instead, average daily purchases of U.S. securities reached $1.2 billion on Apr. 6, then $1.5 billion on Apr. 7, more than doubling a low of $772 million on Mar. 26.
As for just who was buying, Vanda analysts came up with at least one theory.
“Some of the data suggests that wealthier individuals from the boomer generation may have been responsible for the ramp-up in purchases. The average investors’ age in platforms like Schwab or TD Ameritrade is close to 50 and they’re a lot more wealthy than millennials,” said Pierantoni and senior strategist Ben Onatibia in a note.
As of the fourth quarter of 2020, the boomer generation owned just over half of total U.S. household wealth, according to data from the Federal Reserve. That is a $64.72 trillion chunk, versus $5.89 trillion for millennials born after 1980, and $33.06 trillion for Generation X, those born between 1965 and 1980. Boomers saw a substantial boost from early 2020, when that wealth pile was sitting at $56.72 trillion.
The types of stocks being bought also offered clues, they said. “Their behavior is also a lot more conservative than younger investors’. Most of the stocks that made it to the top of our leader board this week are high-quality blue chips, while more speculative stocks like
] or [movie-theater chain]
have dropped out,” they said.
Tracking averaged realized volatility of the 30 most-bought stocks each week, recent data “suggests that investors are being more conservative than in previous rallies,” they said.
A continued strong rollout of Covid-19 vaccines in the U.S. and President
‘s $1.9 trillion infrastructure package may be encouraging those usually more cautious investors into stocks, even if markets have been struggling to reach new records lately. A survey by Mizuho Securities from mid-March indicated that nearly 10% of the $380 billion in stimulus checks being doled out may be used to buy Bitcoin and/or stocks.
Another reason Vanda suspects boomers are in the markets is due to unusually large flows into sovereign bond and credit exchange-traded funds.
Its data show that last week individual investors pumped over $416 million into the 30 largest fixed income ETFs that trade in the U.S., the largest amount on record. The iShares iBoxx $ Investment Grade Corporate Bond ETF
was the biggest contributor, with $128 million in purchases, the data showed.
“While most Robinhooders tend to stay away from ‘boring’ fixed income products, boomers, who are closer to retirement, often prefer them to equities. Monthly data from Charles Schwab’s clients shows that inflows into bond ETFs and MFs [mutual funds] have been twice as large as equities,” said Pierantoni and Onatibia.