"Buy the Recession, Millennials Will Keep the Bull Market Alive for Another Decade"

Recession? No problem. It doesn't matter says Federated Investors portfolio manager Steve Chiavarone. "Ten years from now, when the bull market is still intact, we’ll have the avocado-toast set to thank for it," says Chiavarone.

In a recent interview with CNBC, Chiavarone says there’s at least a decade left in this rally due to a demographic tailwind that’s soon to hit.

“Millennials are entering the workforce, but their wages are going to be under pressure their whole career,” he explained to CNBC’s “Trading Nation” on Friday. “They won’t make enough money to pay down their debt, fund their life and fund retirement where there is no pension. So, they’re going to need equities.”Furthermore, Chiavarone says bull markets typically last 15 to 20 years, and, by his calculations, this one hasn’t even topped 5 years yet.“The risk is not being in this market,” says Chiavarone, who helps run the Federated Global Allocation Fund FSTBX.The firm’s current price target is for 2,750 on the S&P SPX, by the end of next year and 3,000 for 2019.“We are probably frankly low on both of them,” he said. “Tax reform could push up the markets.” That’s not to say there won’t be some pain along the way, specifically the potential for a recession in 2020 and 2021, according to Chiavarone.What’s an investor to do in that case? “Buy the recession,” he said.

Millennials who don't have any money, but do have tons of student debt, will be investing in stocks, even if they lose their job in a recession, because they are worried about their retirement.


Someone remind me of this post in a few years.

Mike "Mish" Shedlock

A more realistic reason for why this guy just may technically be right, is that the valuation of the stock market is by now largely a measure of the size of wealth differences in the US.

An army of millennials without a dime to their name after taxes rent and debt service, will not be able to demand a single CPI basket good whatsoever. And the 1-5% who own and buy all stocks, already have every CPI good they could hope to consume in a million lifetimes.

Leaving the Fed the option to print up and fork over quadrillions with which the latter can buy stocks for, without the slightest concern that it’s favorite harebrained measure for “inflation” will rise.

07-09 scared the bejesus out of the status quo. Moral Hazard is now their stock in trade.

Boomer/retiree equity liquidation will completely suffocate any equity accumulation that Millennials can muster... the former holdings being orders of magnitude larger than the potential volume of the latter...

“. ...the former holdings being orders of magnitude larger than the potential volume of the latter.”

Orders of magnitude higher is doubtful. Most Boomers are busted. The ones smart enough to have anything saved are staying in equities, especially with their Roth holdings which can grow through the generations tax free. Multiple generations is a huge timeline, suitable for stock investing.

The Boomers had the real firepower (because homes didn't cost an arm and a leg) and they net are liquidating stocks... the Millenials have next to nothing because the homes they are buying are orders of magnitude more expensive and debt service is much greater (even if interest rates are lower). Demographics are not a tailwind as Chiavarone says - they are a headwind. Sounds like he just had a brain-fart and these fallacious thoughts bubbled into his head.

As for stocks, money-supply growth (in the U.S.) is falling rapidly and has been for nearly a year now ... BoJ money-printing has pulled back somewhat as a result of their new 'yield-targeting' strategy ... and the ECB is about to cut their QE by half. Oh, and rates are about to rise again in December. In other words, the juice that has kept this bubble aloft is draining away. The effect of this is lagged ... so the clock is ticking.

I fully believe Bitcoin to be in a bubble that dwarfs the tulip bulb mania. A week ago Bitcoin was up over 800% in 12 months. That's incredible; however, since its inception in 2010 at $0.05 Bitcoin is up ($7800 / $0.05) * 100% = 15600000%. Millennials who have spare change to "invest" in Bitcoin certainly won't have anything for buying stocks when the bubble pops.

The beautiful thing about Bitcoin is that it is a truly pure bubble. There is no underlying physical thing of value at all - not even a tulip bulb. The idea that Bitcoin is somehow a "currency" is just a fig leaf hiding its complete nakedness. The only difference between Bitcoin and any other investment is that you can exchange it for goods directly instead of having the (very slight) inconvenience of converting to $ before spending it.

They are using the money they don't have to buy stocks? Makes sense to me