Top-rated Deutsche Bank strategist Jim Reid has warned an intergenerational divide will start electing governments with a socialist agenda by the end of the decade.
Rather than dogma, he bases his argument on economic, social and demographic trends and the readiness of younger voters to vote for higher taxes and inflationary policies – a view unlikely to impress the readers of Family Capital.
Wealth has become heavily skewed in favour of individuals aged 65 or more further empowered by their improved longevity. This is leading to “anger and resentment” among Millennials and Generation Z
According to Reid, this trend will coincide with higher levels of state debt, growing inequality, the rise of China, divisions in Europe, a retreat of globalisation and climate change.
Coming together they are likely to lead to volatility in the bond, currency and equity markets. Property is unlikely to be unaffected.
Reid says: “Unless the post-Millennial generation has a sudden income boost, the price it will be prepared, or able, to pay for the assets of the pre-Millennial population will be under some pressure.”
He believes these trends will create an Age of Disorder, the title of a newly published strategy note. The outlook is so uncertain, he says, that it is even difficult to have faith in family values to forecast future trends. The intergenerational divide has become “relatively extreme.”
“Today’s young are finding themselves priced out of the housing market, living with their parents for longer and having to defer marriage and children. Many feel as though they’ve lost out relative to previous generations.”
Wealth has become heavily skewed in favour of individuals aged 65 or more further empowered by their improved longevity. This is leading to “anger and resentment” among Millennials and Generation Z.
You can even see changes within family offices, where the next-gen has become keener to strike out on their own. Family Capital has documented the way new generations have been building tech businesses separate to family offices, where prior generations are firmly in control. The young are finding the experience painful.
According to Ken Tencer, CEO of Spyder Works: “The senior generation of leaders tend to handle business using the patriarchal style of leadership and make decisions based on their gut instincts, while the new generation of leaders are more collaborative and open to collective decision-making.”
Lower down the socio-economic classes, life is far more of a struggle. Median UK household incomes for those born in the 1980s and 1990s are struggling to keep up with standards of living achieved by those born in the 1970s.
The younger generation has lived through the 2008 financial crisis and the Covid-19 pandemic, viewed as two of the worst economic shocks seen since the 1930s. They have missed out on thirty years of prosperity.
Reid points out younger generations voted heavily against Brexit and US President Trump. Many youngsters are particularly angry at the failure of today’s politicians to deal with today’s environmental issues, leading to the birth of extreme agitprop groups such as Extinction Rebellion.
Based on demographic trends, Reid has calculated that the current US presidential election will be the last where elderly voters will enjoy a clear electoral advantage. By 2028, the young will be at least as powerful.
Those down on their luck who may continue to be influenced by a populist agenda, typified by Trump.
But younger voters tend to be more heavily influenced by ideas – such as socialism – which they have not directly experienced.
Reid warns: “It is increasingly feasible that they could usher in a seismic change within the next decade.”