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Millennials are to blame for skyrocketing inflation, strategist says

Soaring inflation irritates the markets and raises fears of a recession. The latest consumer price index this week showed a staggering 9.1% year-on-year increase in June, prompting Treasury Secretary Janet Yellen to say that inflation in the United States is “unacceptably high”.

Causes of steep jumps include high commodity and energy prices triggered by supply shortages and Russia’s war in Ukraine, record government spending programs for economic stimulus, and low interest rates amid the Covid-19 pandemic, and persistent labor shortages and supply chain issues have increased demand.

But one investor says there’s another major factor to blame: millennials.

“You see, what not everyone brings into the conversation is what really causes inflation, which is too many people with too much money looking for too few goods” , Bill Smead, chief investment officer at Smead Capital Management, told CNBC’s “Squawk Box Europe.” Thursday.

Smead explained that in the United States there are approximately 92 million millennials, mostly in the 27-42 age bracket. “The last time we saw what we call ‘Wolverine Inflation’ – hard inflation for policymakers to stop, was when 75 million baby boomers replaced 44 million silent generation people. in the 1970s.”

“So we have a bunch of people in the United States, (aged) 27 to 42, who have put off buying a house, buying a car, about seven years later than most generations,” he said.

“But in the last couple of years they’ve all come into the party together, and that’s just the beginning of a 10-12 year period where there’s about 50% more people wanting these things. than there was in the previous group.”

“So the Fed may tighten credit, but it won’t reduce the number of people wanting these necessities compared to the previous group,” Smead said.

Burnout was cited as one of the top three reasons young workers quit their jobs in the past two years, according to Deloitte’s survey.

Tom Werner | Stone | Getty Images

Many millennials would disagree with the idea that they all have a lot of money and are now buying assets – according to a number of surveys over the past two years, over 60% of millennials delay buying a home because of student debt or the sheer cost of homes relative to wages. This generation is also the one with the fastest growing debt burden.

Even many who have sufficient funds are still holding back. As recently as June, the CNBC Millionaire Survey found that millennials are “three times more likely to cut back on major purchases than their baby boomer counterparts.”

“Forty-four percent of millennial respondents said higher rates caused them to delay buying a new home, compared to just 6% of baby boomers. Nearly half of millennial millionaires millennials said they put off buying a car because of higher rates — more than double the rate of baby boomers,” CNBC wrote.

Pressure in the housing market due to pandemic-induced inventory shortages and stiff competition is also keeping many potential buyers in their late 20s and early 40s away.

Largest home buyers market by generation

Despite all of this, millennials still make up the largest portion of the homebuyer market by generation. They are also the largest generation in the United States in terms of population.

“Millennials now make up 43% of homebuyers — most of any generation — an increase from 37% last year,” the National Realtors Association found in its latest study released in March.

The NAR categorizes 23-31 year olds as “younger millennials” and 32-41 year olds as “older millennials”.

“Eighty-one percent of young millennials and 48% of senior millennials were first-time home buyers, more than other age groups,” NAR wrote.

Older millennials made up the “largest generational group of shoppers” at 25%, and the median age was 36, according to the study. The next largest group was Generation X at 22% with a median age of 49.

“Some young adults have used the pandemic to their financial advantage by paying off debt and lowering the cost of rent by moving in with their families. They are now jumping headfirst into homeownership,” said Jessica Lautz, vice -Chair of NAR Demographics and Behavioral Insights. in the report.

The numbers still leave a lot of young people out of the picture. According to rental listings site Apartment List, in 2020, 18% of millennials thought they would pay rent forever, giving up property — nearly double the rate of 10.7% two years earlier.

– CNBC’s Robert Frank contributed to this report.