Stock markets are too high and set to fall?

InvesterJones

https://forums.moneysavingexpert.com/discussion/comment/82004019#Comment_82004019

Are you suggesting that you think a new generation have access to more wealth than before, and that they're more likely to spend it on crypto etc. rather than investing it in traditional markets? If so, wouldn't that result in lower market values (for at least the majority of companies)?

[Deleted User]

https://forums.moneysavingexpert.com/discussion/comment/82004051#Comment_82004051

There can be absolutely no doubt that the wealth transfer is taking place and that the younger generations do have access to significantly greater amounts of wealth than previous, that is an undeniable fact. How those younger people will spend that money, on new asset classes or on other things entirely, is the subject of much debate at all levels, in all countries.

masonic

Taking cryptocurrency as an example, this has gone from a negligible value to around $2 trillion market cap in around a decade. What impact has that had on equities in general? One might expect a fall in CAPE or other valuation metrics, but I don't see it.

If you are predicting crypto absorbing capital at a greater rate going forward, then that would be an investment case for crypto, but I don't see that as a logical conclusion of wealth transfers either.

Then we have the oft-quoted home bias of US investors, which would point to a disproportionate effect on the US market.

So I don't think you can practically take account of wealth transfers between foreign investors when predicting the course of the UK equity market. The effect is unmeasurable and the subject of pure speculation.

[Deleted User]

https://forums.moneysavingexpert.com/discussion/comment/82004147#Comment_82004147

Crypto was only one example.

• "Private Assets & Alternatives: Younger demographics show strong interest in private equity, venture capital, and real estate, looking for yield and uncorrelated growth outside of public markets.

• Impact & Sustainable Investing: Younger generations and women are more likely to prioritize Environmental, Social, and Governance (ESG) criteria and impact investing alongside financial returns.

• Digital Assets: While digital assets like cryptocurrencies and tokenized investments are attractive to younger cohorts, they are often overshadowed by a stronger demand for impact investing and AI-driven technology themes".

• The sums involved run to over USD 85 trill. globally over two decades. Whether or not oppoortunities will arise to take advantage, remains to be seen, I'll be very surprised if at a minimum we don't see new trends that have their roots in this subject although many will not understand this until after the fact! What is not speculation is that the transfer is taking place, that part is very real. What is also not speculation is that tastes and preferences differ between generations.

masonic

What is also not speculation is that tastes and preferences differ between generations.

I'd be interested in the evidence for this, in terms of asset allocation between recent generations. I don't think I've come across any such study.

The above looks like it is the product of an AI chat bot, so what references were given to support the statements, and do the references support these conclusions or were the conclusions hallucinated?

Wealth transfers are an eternal thing while people have finite lives and are able to pass on their wealth to future generations. What isn't clear is the extent to which "this time it's different".

masonic

Just to add, on the subject of ESG, I found this: https://www.bankrate.com/investing/esg-investing/

That suggests $30tn invested as of 2022, predicted to rise to $40tn by 2030. So what structural effect has that had on global markets? It doesn't appear to have caused those companies passing the criteria to outperform. Generally the opposite has been true, despite the influx of capital.

[Deleted User]

https://forums.moneysavingexpert.com/discussion/comment/82004362#Comment_82004362

Here's a piece by Merrill on the subject, they refer to the transfer as the greatest in history. I don't know if it is that or if it isn't, I've merely tried to post links and quotes that will allow readers of this forum an overview or high level understanding of what I think the issue is. It matters not a jot to me whether anyone does or does not agree that there is a mega event taking place and that it might have an impact on markets and investing.

https://www.ml.com/articles/great-wealth-transfer-impact.html

I'm tempted to do some research to prove that tastes and preferences differ between generations but it seems like a futile task and I have better things to waste my time on, so I'll leave that one hanging.

EDIT….I lied, this one just came to me via email!

https://www.researchgate.net/publication/368797327_Generational_theory_of_behavioral_biases_in_investment_behavior

masonic

I don't doubt that the value of inherited wealth will be the greatest in history in nominal terms. Inflation has seen to that. The CFA institute notes that this is the effect of an expanding economy and the proportion of wealth being transferred only represents about 1% of total wealth per year https://www.cfainstitute.org/insights/articles/great-wealth-transfer-myths-reality?hl=en-GB#:~:text=%E2%80%9CThe%20proportion%20of%20annual%20transfer,from%20created%20wealth%20over%20time.%E2%80%9D

The above is broadly in line with the average of around 0.8% of the population dying each year.

This is an example of how discussion and dissection of various sources and arguments can help clarify the true situation, and is generally a good thing. It helps us all reach a better understanding and put things into proportion.

The original "Great Wealth Transfer" moniker appears to originate from a NY Times article, and was deliberately sensational.

[Deleted User]

https://forums.moneysavingexpert.com/discussion/comment/82004436#Comment_82004436

I'm not sure how that link changes things. It confirms the transfer is taking place, it confirms that investing styles between generations are different and you've agreed the size of the transfer is massive. In essence, we all now seem to agree with my first post on this subject five pages ago! I'll therefore leave it to others who may have an interest in the topic to do their own additional research….out.

(a late incomming link recieved, a paper on this subject from U of M)

https://sites.lsa.umich.edu/mje/2025/04/03/the-great-wealth-transfer-and-its-implications-for-the-american-economy/

masonic

https://forums.moneysavingexpert.com/discussion/comment/82004447#Comment_82004447

I don't agree that the size is massive. According to the CFA Institute information, the relative size is in line with historical norms. The sleight of hand being used to sensationalise it is ignoring inflation.

They are also ignoring that the magnitude of wealth that isn't transferring is at a record high. That counterpoint could be used in isolation to argue the opposite points.

The conclusion I've drawn is that a tiny 1% of assets per year are changing hands due to inheritance and that is far smaller than the volume of assets traded for other reasons. Hence the effect is being greatly exaggerated by those wishing to spin a narrative.

Furthermore, even trillions funnelled into crypto and tens of trillions funnelled into ESG funds has failed to have a material impact on the performance of the wider market.

So not worth worrying about as an investor.