COVID-19 Rattles Markets—How Are Millennial Investors Responding?

As COVID-19 sweeps the world, broad swaths of the global economy are coming under pressure from shelter-in-place orders and the shutdown of nonessential businesses. Markets are feeling the pain, as evidenced by spiking volatility levels.[1] The current pandemic is likely the first serious economic crisis most millennials will face as investors—so how is the younger generation responding?

The Q1 2020 release of the Apex Millennial 100, a ranking of the top 100 stocks owned by a subset of millennials, revealed several interesting trends. Here we explore how millennial investors are positioning their portfolios according to life amid the “new normal” by scooping up shares of hard-hit travel companies and taking advantage of the bright spots created by relevant health care companies. Millennials have also built positions in work-from-home service providers, sticking to a “buy what you know” mentality.

Bargain shopping for travel companies

The economic slowdown triggered by the spread of COVID-19 is deeply impacting the $8 trillion global travel industry. As restrictive measures carry deeper into the spring and summer, the airline industry is poised to lose a staggering amount, estimated at more than $250 billion.^[2] Millennial investors, however, seem to be bullish on the longer-term prospects for airlines: They’ve been loading up on stocks of major airlines at cheaper prices.

Delta made the biggest quarter-over-quarter jump, moving from unranked to #21. United was also a new addition to the Apex Millennial 100, joining the list at #57. Meanwhile, American Airlines climbed 30 spots to #46 and Southwest moved up 10 positions to #88. Millennials seem to be unique in their optimism for airlines: The four major airlines noted here are ranked notably higher for millennials than for other generations.

Millennials were also supportive of Boeing. The commercial aerospace company climbed three spots to land at #14, despite a share price decline of more than 50% during the quarter. [3] Before the pandemic, Boeing was hindered by deadly crashes of its 737 Max aircraft, and now, it’s battling concerns that the pandemic may hurt demand for its products for years to come. Although investors were faced with a wave of bad news—including a temporary halt to production and dividend suspension[4]—some took solace in the possibility of forthcoming federal aid.

The COVID-19 outbreak is also wreaking havoc on the cruise industry—another area where millennials made meaningful moves. Carnival (#38), Royal Caribbean (#54) and Norwegian (#71) were all new additions to the Apex Millennial 100 last quarter. In fact, cruise stocks saw the highest percentage increase in number of positions and quantity of shares held of any industry.

Millennials’ bullish outlook for travel companies isn’t universal though, with hotels getting the cold shoulder. One exception: Casino and resort operator MGM, which joined the list at #89.

WFH FTW

COVID-19 is forcing many businesses to close their offices and direct millions of Americans to work from home in the name of social distancing. According to the investment adage, it’s wise to to “buy what you know,” it makes sense to see millennials buying shares of technology companies that enable remote work.

Zoom, a leading provider of video and web conferencing services, joined the Apex Millennial 100 at #35. Business communication platform Slack jumped 18 spots from the previous quarter to land at #65.

Support for health care companies

The Apex Millennial 100 revealed support for health care companies that are closely linked to treatments and other services related to COVID-19. One approach to treatment involves antiviral drugs, dozens of which are in various stages of development. A drug called remdesivir, from Gilead, is currently showing promise—and millennials took note, with Gilead making a big quarter-over-quarter jump from #91 to #45.

Additionally, Teladoc (#91) joined the Apex Millennial 100 last quarter. The multinational telemedicine and virtual health care company gained ground as public health officials urge patients to seek remote treatment in an effort to free up doctors and other front-line providers and maintain social distancing.

Millennials also significantly increased their ownership of Moderna, though it fell shy of being counted within the Apex Millennial 100. The Massachusetts-based company is partnering with the National Institutes of Health to develop a vaccine which harnesses a new technology to protect against COVID-19.

What this means for financial service providers

For advisory practices and financial services firms interested in working with millennials, we believe this data provides actionable insight. Savvy providers are weaving millennial investors’ motivations into discussions about financial and investment objectives, and when appropriate, adapting investment strategies to include unique exposures. Forward-thinking providers are also recognizing that younger investors may have unique preferences during the current pandemic and are identifying ways to derive benefit from this mentality.