‘Zillennials’ are going to change investing forever, BofA says

Published 19 Nov,2020 via Bloomberg Technology & Innovation - Eating meat is out, flight-shaming is in. Gen Z is transforming the world and investors need to be prepared.

As this new cohort -- “Zillennials” -- comes of age it’s going to eclipse the vaunted Millennials, boost emerging markets and help preferred sectors outperform as other more passe companies are likely to fall by the wayside, Bank of America Corp. wrote in a recent research report.

“The Gen Z revolution is starting, as the first generation born into an online world is now entering the workforce and compelling other generations to adapt to them, not vice versa,” strategists led by Haim Israel said.

Gen Z -- the group born between about 1996 and 2016 -- is on track to overtake Millennials in income by 2031, the BofA report says. And nine of 10 live in emerging markets, with India accounting for about 20% of the total. Countries like Mexico, the Philippines and Thailand are also set to benefit from the changeover. Sectors that will benefit include e-commerce, payments, luxury, media and ESG, according to BofA, while areas like alcohol, meat, cars and travel may suffer.

BofA conducted a survey of more than 14,000 Gen Z members in August, and here are some of the conclusions:

• The majority have a meat restriction of some kind, and many don’t drink
• They welcome new technology to manage finances from phones to cryptocurrencies, implying banks and asset managers will need to reassess their services
• 40% of 16-18 year olds would rather interact virtually with friends versus 35% of Millennials and 30% of Gen X
• About 18% of 18-24 year olds surveyed watch traditional sports regularly each month, compared with 21% who watch eSports regularly each month

Investment implications could include, according to BofA:

• Consumer-driven sustainable activism could lead to risks for “harmful” sectors like fast fashion
• Increasing focus on Asia-Pacific, which accounts for 37% of Gen Z income; that’s set to rise to 41% by 2040
• Voice technology could allow better access to e-commerce to individuals with limited literacy skills as voice assistants are launched in more languages
• The airline and travel industry could be affected by sustainability concerns as “flight shaming” becomes more prevalent
• Alcohol and tobacco companies will need to increasingly focus on products seen as healthier -- such as beverages with lower sugar and alcohol contents, or heating rather than burning tobacco.

And in case this isn’t forward-thinking enough for you, BofA notes that the next to come along is Gen C: The Covid generation.

“It is the generation that will have only ever known problem solving through fiscal stimulus and free government money potentially paving the way for universal basic income and health-care access,” the strategists said. “Gen C will be unable to live without tech in every aspect of their lives” and “their avatars will protest virtually in the online Total Reality world with their friends on the latest cultural movement.”

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