Sometimes the best insights can be found in the most innocuous articles. According to a story in the Wall Street Journal vintage is “in vogue”. Evidently in the USA half of respondents to an Accenture shopping survey said they would consider giving second-hand clothing as a gift. The results are part of a broader trend called “responsible retailing”. Other examples of the trend include the insight that 64% of consumers are very willing to accept unwrapped gifts, and half would opt for “green-shipping” choices. With low interest rates leading to high rents the glory days of the high street are well and truly over.
This is significant as the growth in monetary wealth for the baby boomers has been based on what could loosely be described as the American model. In economics, the term consumerism is used to refer to economic policies which encourage consumption. In a consumerist society, people are bombarded by adverts, discounts, product launches, product giveaways among many other promotions meant to encourage constant and significant spending on goods and services. Consumerism encourages pursuit for the “good life”. This may come at the expense of things like saving and investing.
The problem with consumer-based growth is the fact that it leads to environmental degradation, moral degradation, higher debt levels, and mental health problems (stress, depression). For decades investment economists have warned about the risks of a sea-change in attitudes, this sea-change is now happening. The implications for investing are tremendous and investors that fail to appreciate the significance of the current trends will be left behind. The worry is that the list of industries and sectors to avoid is growing. The tools that will be used to stimulate the economy will also support equities. However, the market is increasingly being supported by a very narrow group of stocks and whilst the longer-term outlook remains favourable we expect volatility to return. Time to get out the hard hats!
Written by Ben Shenton.