One of the big lessons from coronavirus-era shutdowns was that consumer behavior can rapidly shift. Those fast changes carry with them investment implications. Pandemic-forced alterations in consumer proclivities are just one example. There are more “natural” changes in consumer behavior that build over time. Many of those are driven by younger generations as they enter the workforce and increase their access to disposable income. With that and the economic rise of millennials and Gen Z in mind, ETFs like the Invesco QQQ Trust (QQQ) and the Invesco NASDAQ 100 ETF (QQQM) could prove useful for long-term investors.
Both ETFs follow the Nasdaq-100 Index (NDX), which is heavy on growth stocks and sectors. Those asset classes are levered to evolving consumer habits. Long-term investors looking to capitalize on those trends may want to evaluate QQQM. That’s because its annual fee is 5 basis points below that of QQQ’s.
Demographic Data Support QQQ, QQQM
Led by a 5.63% weight to Amazon (AMZN), QQQ and QQQM devote 14% of their rosters to consumer cyclical stocks. That makes that sector the third-largest exposure in the ETFs. That’s relevant because demographic changes could support long-term upside for many of the ETFs’ consumer discretionary holdings.
“Gen Z and Millennial consumers should grow to 68% of the population by 2028 vs 45% today. Within the United States they will inherit an estimated $60T of wealth into 2050 and have vastly different perspectives on brands, channels of engagement, consumption, and household formation relative to older demographics,” noted TD Cowen. “The combination of the consumer’s increased focus on value and the success of premium positioned brands has created an increasingly polarized consumer sector.”
The research firm’s recent survey of 2,700 millennial and Gen Z consumers highlights the members of those demographics have distinct preferences for specific members of the “consumer discretionary, consumer staples, and e-commerce sectors.”
Another catalyst for QQQ and QQQM as plays on younger consumers’ shifting habits is social commerce. That is simply the act of buying items via social media forums. This is relevant for ETFs that allocate almost 4% of their rosters to Facebook parent Meta Platforms (META). Additionally, the rise of online and mobile retail buying is supported by the tech-heavy rosters of the Invesco ETFs.
“18–35-year-old consumers spend on average 4-8 hours per day on cellphones. ~20% of the cohort spends 8-10+ hours per day. These consumers consider cell phones the most important part of their budget – further amplifying social commerce’s structural gains,” added TD Cowen.
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