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2 Reasons Millennials Are Pouring Into The Stock Market For The First Time

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2 Reasons Millennials Are Pouring Into The Stock Market For The First Time

One of the biggest stories on Wall Street in 2020 has been the surge of first-time traders using apps like Robinhood, many of which are millennials under the age of 40.

It may seem strange to see an entire generation of investors all suddenly taking interest in stocks all at once, but DataTrek Research co-founder Jessica Rabe said Friday that the flood of millennial investors this year makes perfect sense for two reasons.

1. They've Seen This Movie Before: Rabe said that, while many millennials may have never invested before prior to 2020, it doesn’t mean they haven’t been paying attention to Wall Street. Rabe said many Americans in her generation lived through both the dot-com bubble in 2000 and the financial crisis in 2008. In both instances, the economy tanked and the stock market crashed.

But in both instances, opportunistic investors who jumped in and bought stocks on the dip got a huge payoff.

“Millennials have seen this boom-bust movie twice already. They know how it ends – with a rally – and that’s exactly what happened in 2020,” Rabe said.

The 2020 COVID-19 crisis has been the first opportunity for millennials to act on these lessons of the past in the 12 years since the 2008 crisis.

2. Millennials Know Tech: Second, the most recent data from Robinhood suggests first-time investors have been buying shares of tech companies like Apple, Inc. (NASDAQ: AAPL), Amazon.com, Inc. (NASDAQ: AMZN), Facebook, Inc. (NASDAQ: FB) and Microsoft Corporation (NASDAQ: MSFT).
Rabe said this trading activity suggests millennials are buying shares of companies that they know and trust.

“Millennials broadly know and love tech more than boomers and their intuition about the sector remains spot on as it continues to rally to new highs and maintain its stance as market leadership,” Rabe said.

Since the market bottom back in March, the SPDR S&P 500 ETF Trust (NYSE: SPY) is up 53.2%, but the Technology Select Sector SPDR Fund (NYSE: XLK) is up 74.6%. Rabe said millennials’ correctly identified technology as the primary growth driver of the recovery, even if they may not have fully understood the individual fundamentals of the stocks they were buying.

Benzinga’s Take: Rabe makes the point that millennials may simply be a more trading-savvy generation relative to the long-term investing mindset of many Baby Boomers. But every successful trader must identify both an entry point and an exit point for each trade, so it remains to be seen how well new millennial traders will time the next market downturn.

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