Gen Z incomes predicted to beat millennials’ in 10 years and be ‘most disruptive generation ever’

Bank of America predicts that Generation Z (Gen Z) will be the "most disruptive generation ever" and will see their income surpass that of millennials by 2031. 

"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," said Haim Israel, global head of thematic investment strategy at BofA Global Research, in a report released this week. 

This meant Gen Z, considered by the U.S. investment bank to be those born between 1996 and 2016, was about to become "most disruptive to economies, markets and social systems." Lauma Timans-Kalns, a strategist at the bank, explained to CNBC over email that the "defining influential events that bookmark this generation are 9/11 and Covid," so those born between those years would not remember the former but would certainly remember the latter. 

BofA said Gen Z's economic power was the fastest growing across all generational cohorts. This generation's income is expected to increase fivefold by 2030 to $33 trillion as they enter the workplace, accounting for over a quarter of global income and then surpassing millennials' income by 2031. 

"The Great Wealth Transfer," from older cohorts will add to Gen Z's consumer power, the report said, with baby boomers and the silent generation in the U.S. alone currently sitting on $78 trillion of wealth. 

Nine out of 10 Gen Z-ers live in emerging markets. With a fifth of this generation globally living in India, the BofA's Israel said it "stands out as the Gen Z country." India is also seeing improved youth literacy rates, urbanization, and rapid expansion of technological infrastructure, the report pointed out. 

Mexico, the Philippines and Thailand were some of the other emerging market countries the report underlined as having the potential to "capitalize on the Gen Z revolution." 

BofA compiled the data referred to in the report from a combination of sources, including its international 2020 Thematic Demographics Survey, which polled over 14,500 consumers aged 16 and over. It also used data from the United Nations, Euromonitor and Google Trends. 

Investment winners

Nearly half of U.S. teens are online "almost constantly," the report also stated, while a quarter of this generation said they usually spend more than 10 hours a day on their mobile.

Half of Gen Z also stream music on their mobile, so BofA highlighted Universal Music Group, which is a subsidiary of Vivendi, as one of the beneficiaries of this trend. The growth of e-sports is set to benefit Ubisoft, while Just Eat Takeaway and Delivery Hero could be winners from the increased use of food delivery services.

BofA also found that 44% of Gen Z-ers said they are omnichannel shoppers, using a combination of in-store and online to shop. They were found to be less price sensitive when buying products, choosing quality over price as their top purchasing factor, and sustainability was also highlighted as an important issue as a consumer. 

Investment winners from the omnichannel shopping trend include retailers Urban Outfitters and Lululemon, while BofA highlights denim brand Levi's as a beneficiary of the resale theme.

Winners from trends in the beauty sector are L'Oréal, thanks to its digital developments, presence in China and the skin care sector, and Unilever, due to its presence in emerging markets and its sustainability credentials.

Over 80% of Gen Z-ers want to own a home, with BofA recommending stock picks such as home improvement retailers like Floor & Decor Holdings, furnishings retailers like Bed, Bath & Beyond and bedding businesses including Purple Innovation.

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