According to Meredith Whitney, the former “Wall Street sage” who predicted the Global Financial Crisis, baby boomer parents are passing on wealth to their Gen Z and millennial children, enabling them to drive strong spending sprees.
Despite warnings about the end of COVID-related stimulus checks and weak demand from discount retailers such as Dollar Tree and Dollar General, other data points to stronger spending patterns in other parts of the economy.
in Financial Times Editorial Last Sunday, the CEO of Meredith Whitney Advisory Group said that data from American Express shows that Gen Z and millennials are spending at five times the rate of baby boomers.
“They can afford to spend money on things like French press coffee, Instagram-worthy leisure experiences, online gaming, sports betting, and of course avocado toast,” she wrote.
Whitney noted that households earning more than $100,000 a year saw little change in after-tax income between 2019 and 2022.
Meanwhile, households earning more than $150,000 have kept their spending relatively constant over the past year, even as spending shifts from discretionary items to necessities.
“Twenty-four to 38-year-olds make up 20 percent of the U.S. population and have more discretionary spending power than any other age group,” Whitney added. “They have been and will continue to be the beneficiaries of another kind of subsidy: their parents.”
Younger generations are living with their parents at record rates and enjoy their parents helping them with expenses such as mobile phone bills, she said.
And considering that roughly 20% of men and 12% of women ages 24 to 35 live with their parents, they’re also not spending money on housing-related expenses like insurance, property taxes and utilities, Whitney noted.
“As long as these trends continue, this age group will remain the primary driver of discretionary spending in the United States,” she predicts. “It’s no wonder there’s so much debate about the state of the U.S. economy.”
Whitney’s analysis comes just days before the Commerce Department’s monthly retail sales report showed an unexpected increase, suggesting that consumers are still able and willing to increase their spending despite years of inflation and higher borrowing costs.
She also repeated something “bond king” Bill Gross said last month: He posted a similar view about X.However, there is no supporting data.
“While it’s hard to measure, I suspect that upper-middle class and affluent baby boomers are transferring assets and cash to pay bills and fund the spending of millennials and younger generations, boosting retail sales and the economy in the process,” he wrote. “In essence, they are liquidating their balance sheets to fund their spending, and this trend will continue as long as stock and home prices remain high.”
