As Gen Z members enter the workforce, their income is rapidly increasing, projected to reach $33 trillion globally by 2031, surpassing millennials. Contrary to stereotypes, many are financially cautious, learning from past economic challenges and prioritizing financial stability and advancement.
In a May survey by the CFA Institute, over 50% of Gen Z respondents reported engaging in investing, and 82% of American Gen Z investors started investing before the age of 21, surpassing millennials and Gen Xers. Nearly 90% of active Gen Z investors responded to economic factors like inflation and rising interest rates, according to an April Bankrate survey, marking the highest among generations. The Federal Reserve’s Survey of Consumer Finances revealed that more Americans held stocks in 2022 than in any prior year.
Concerns about economic uncertainty and retirement planning drive Gen Z’s investment mindset. Over half surveyed by the CFA Institute invested with retirement goals, acknowledging the need for substantial funds, estimated at $3 million by advisors. A proactive approach is evident, with 66% of Gen Zers, according to the Transamerica Center for Retirement Studies, already saving for retirement, allocating a median of 20% of their annual income — nearly double the proportion of older generations.
It may not be surprising to note that Gen Z investors have a particular affinity for higher-risk assets, such as Dogecoin (DOGE-USD) and GameStop (NYSE:GME). However, Millennials have also contributed a great deal to the recent meme rallies in these high-risk assets.
Let’s dive into what this investing mindset could mean for an investing group that may not have the funds to lose on such speculation.
Recent DOGE Surge
Dogecoin has certainly been among the best-performing mega-cap cryptocurrencies. With a market capitalization of around $12.6 billion at the time of writing, this meme token is larger than many well-known and respected companies. Accordingly, it’s clear the power of speculators and meme investors remains strong, and certain crypto assets are often the first other investors point to as examples of how Millennials and Gen Z investors have reshaped the investing landscape.
However, upon closer examination of on-chain data, it’s evident that corporate entities and high-net-worth investors have shown a heightened interest in Dogecoin. On November 22, the Dogecoin network registered 1,450 Large Transactions, marking a 55% surge from the previous day. That increased demand from large investors contributed to a price rally for DOGE over the past week or so, contrasting with negative trends in other prominent meme tokens.
Whale transactions in Dogecoin increased by 54% over the past week, signaling heightened demand from corporate entities and high-net-worth investors. The surge, tracked through transactions exceeding $100,000, acts as a notable bullish catalyst, influencing both retail traders and market liquidity. The sustained rise in corporate demand creates favorable conditions for bullish swing-day traders.
Rising whale demand remains a key factor in the recent DOGE price surge. Of course, Dogecoin remains a highly speculative asset that investors should certainly remain cautious about. Personally, this is one particular cryptocurrency I don’t think is worth touching. But until the speculative excesses come out of the market, it’s likely to be an asset driven by strong retail investor demand from those in the younger age-range segments of the market. Let’s see if demand can keep up moving forward.
Recent GME Surge
GameStop shares have seen recent surges of nearly 20%, once again fueled by retail traders. The increase, driven by renewed risk appetite, anticipates the company’s upcoming quarterly results. Over the last two sessions, the meme stock rose approximately 36% to nearly $17 per share. Interactive Brokers (NASDAQ:IBKR) Chief Strategist Steve Sosnick noted a resurgence in speculation, with GameStop at its focal point.
Other meme stocks have also surged as the S&P 500 neared its 2023 peak amid optimism around stable U.S. interest rates.
Among the most talked-about on StockTwits last week, both stocks face a spotlight. GameStop, reporting Q3 results on Dec. 6, is expected to narrow its net loss from $93.4 million to $25.6 million, while 21.6% of its shares were shorted, potentially causing bearish investors a combined loss of $200 million on Tuesday and Wednesday.
Concerns among short sellers may arise from GameStop’s recent price surge and anticipation of better-than-expected earnings, noted Ortex co-founder Peter Hillerberg. The rise in GameStop’s shares is fueled by robust options activity, particularly with 230,000 contracts traded, mostly in call options.
Large purchases of out-of-the-money call options, even if not immediately profitable, can contribute to upward pressure on the stock’s price, according to Spotgamma founder Brent Kochuba. The potential for another 15% or 20% upward move remains in play.
What Does the Meme Stocks Surge Mean to Millennials and Gen-Z Investors?
Online culture, particularly on platforms like TikTok, YouTube and Reddit, not only provides Millennials and Gen Z investors with access to investing education and resources but also propels them into the financial realm. Financial influencers, or “finfluencers,” inundate social media with promises of easy money through investment. With flashy graphics and dollar signs, they entice followers with claims of hundreds or even thousands of dollars in earnings, creating a narrative that says, “If I did it, so can you!”
Promotion fueled FOMO among Gen Z investors, with half succumbing to it, per the CFA survey. The pandemic’s meme-stock craze amplified this, drawing a remarkable 1,400% surge in new-account registrations among 18- to 24-year-old men and 1,200% among women on Interactive Investor in the last two weeks of January 2021 compared to the prior year.
In a U.K. Royal Mint survey, 64% of Gen Zers fell for “get rich quick” schemes, as per Barclays Smart Investor. Almost half of Gen Z investors sought swift gains through short-term strategies, with 18 to 24-year-olds planning investments lasting two to five years. A CFA Institute report noted global Gen Z investors as the most willing to speculate on unproven assets, including nonfungible tokens and cryptocurrency.
The risky mindset, evident in the collapse of the crypto token Luna, led to a substantial downturn in the overall cryptocurrency market, wiping out an estimated $60 billion and causing significant losses for many Gen Z investors. They have been urged to use caution and independent research when considering investment advice from social media.
Gen Z enters a prosperous job market with robust wage growth, contrasting with Millennials who faced two recessions before 40, causing job losses, home foreclosures and investment setbacks. The younger generation, learning from its elders, leverages online resources to grow their money. Whether driven by the fear of missing out on investment gains or retirement insecurity, they heeded the advice to “start early.” With time on their side, Gen Z fully embraced financial opportunities.
On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
