Millennials are to blame for sky-high inflation, says strategist

Rising inflation is putting markets on edge and triggering fears of recession. The latest consumer price index this week revealed a sharp 9.1% year-on-year increase in June, prompting Treasury Secretary Janet Yellen to say that inflation in the United States is “unacceptably high.”

The reasons behind the steep jumps include high commodity and energy prices triggered by supply shortages and Russia’s war in Ukraine, record-breaking public spending on economic stimulus and low interest rates amid the Covid-19 pandemic, and continued labor shortages and supply chain problems meeting rising demand.

But one investor claims there is another important factor to blame: millennials.

“See what everyone does not include in the conversation is what really causes inflation, which is too many people with too much money chasing too few goods,” Bill Smead, chief investment officer at Smead Capital Management, told CNBC’s “Squawk Box Europe” ” on Thursday.

Smead explained that there are an estimated 92 million millennials in the United States, primarily in the age group of 27 to 42 years. “The last time we saw what we call ‘wolf inflation’ – which is inflation that is hard for politicians to stop – was when 75 million baby boomers had replaced 44 million silent generational people in the 1970s.”

“So we have in the United States a whole lot of people, (aged) 27 to 42, who have postponed home purchases and car purchases for about seven years later than most generations,” he said.

“But in the last two years, they have all gone into the party together, and this is only the beginning of a 10 to 12 year period, where there are about 50% more people who want these things than there were in the previous group. . “

“So the Fed can tighten the credit, but it will not reduce the number of people who want these necessities compared to the previous group,” Smead said.

Burnout was cited as one of the top three causes of younger workers leaving their jobs within the past two years, according to Deloitte’s study.

Tom Werner | Sten | Getty pictures

Lots of millennials would disagree with the idea that they all have a lot of money and are now buying assets – according to a series of studies conducted in the last two years, postponing up to 60% of millennials home purchases due to student debt or simple housing costs compared to pay. This generation is also the one with the fastest growing debt burden.

Even many of them with abundant funds still hold back. As recently as June, the CNBC Millionaire Survey found that millennials are “three times more likely to cut back on big purchases compared to their baby boomer counterparts.”

“44 percent of millennial respondents said higher prices have caused them to delay buying a new home compared to just 6 percent of baby boomers. Nearly half of millennial millionaires said they delay the purchase of a car because of higher prices – more than double the number of baby boomers, “wrote CNBC.

Pressure in the housing market due to the pandemic-induced lack of furniture and high competition also keeps many potential buyers in their late 20s to early 40s age group away.

Largest home buyer market by generation

Despite all this, millennials still make up the largest share of the homebuyer market by generation. They are also the largest generation in the United States by population.

“Millennials now make up 43% of homebuyers – the most of any generation – up from 37% last year,” the National Realtors Association found in its latest study released in March.

NAR classifies 23- to 31-year-olds as “younger millennials” and 32 to 41-year-olds as “older millennials.”

“Eighty-eight percent of younger millennials and 48 percent of older millennials were first-time home buyers, more than other age groups,” NAR wrote.

Older millennials made up the “largest generation group of buyers” at 25%, and the median age was 36, the study found. The second largest group was Gen Xers at 22% with a median age of 49.

“Some young adults have used the pandemic to their financial advantage by repaying debt and reducing rent by moving in with the family. They are now jumping headlong into home ownership,” said Jessica Lautz, NAR’s vice president of demographics and behavioral insights. in the report.

The numbers still leave many young people out of the picture. According to the rental site Apartment List, 18% of millennials in 2020 thought they would pay rent forever and give up home ownership – almost double the rate of 10.7% two years earlier.

– CNBC’s Robert Frank contributed to this report.

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