Gen Z Investors Have Been Hit Hard by the Stock Market and Cryptocurrency Crash and are Rethinking Their Investment Approach

  • Gen Z was the #1 generation to lose their jobs during the pandemic 
  • In spite of the pandemic challenge, many in Gen Z started investing often due to to lower spending and government stimulus 
  • Gen Z has been shocked by how fast and far cryptocurrency valuations have  fallen as well as the broader stock market rapidly entering a bear market 
  • The results of this rapid shock to Gen Z’s investing plans and experience could be felt for years to come 

The oldest members of Gen Z are now well into their mid 20’s. Many of them have heard that you have to start investing young if you want the best opportunity to achieve your personal financial goals. This opportunity presented itself in a very unexpected way: a horrible pandemic followed by government stimulus and a reduction in traditional spending options. 

Gen Z was on a trajectory to enter the workforce, higher education, and adulthood like previous generations. However, the generation crashed right into the pandemic in March 2020. The Center for Generational Kinetics’ research uncovered and made national news revealing that Gen Z, not older generations, were the #1 generation to lose their job, the #1 generation to have a reduction in pay, and the #1 generation to have a reduction in hours at work. 

At the same time, millions of Gen Z’ers delayed or changed their plans to move out on their own, start college, or start families. The result was that many in the generation “started college” while living at home with family members and participating in classes virtually, were unable to move out as planned so instead they hunkered down trying to cut costs while living with family members, and delayed other major purchases they had planned—from a car purchase to vacations. 

In a highly unexpected twist, the US government stepped in to shore up the economy by sending checks to individuals in the US who met certain qualifications, which included many in Gen Z. The result of this decrease in costs and unexpected receipt of stimulus checks meant that many in Gen Z for the first time were able to start investing. Another key driver: robo-advisors and online investing companies that enabled Gen Z to start investing with very small dollar amounts, such as $25 or $50. Giving even more access, cryptocurrency exchanges made it possible for Gen Z to start investing even smaller amounts and being able to trade 24/7—like playing a video game! 

What happened? The stock market recovered and roared to record highs, cryptocurrency became a massive asset bubble, and Gen Z—like many other generations—thought investments only went up and to the right! However, the rapid deterioration of valuations in the stock market, the “crypto winter” that set in, and the complete collapse of some crypto investments turned the good times into a huge shock to the system for Gen Z who have never been through a traditional bear market or market downturn! 

The result is that millions of young adults started investing, often on their own in addition to employer sponsored plans, and they saw the valuations rapidly increase. However, at a time when many in Gen Z now could use that money due to high inflation driving up the costs of goods, rent, fuel, and much more, those inflated valuations have crashed. The hangover effect from this investing experience will be studied by CGK for years to come, but the key to know is that this is a formative investing event for Gen Z at a key time in their emergence into adulthood and re-emergence from Covid-19 lockdowns and limitations.  

Now Gen Z faces a moment of truth and learning that previous generations have faced at different life stages and across decades: what do you do with the money you have remaining in the markets and do you try to continue investing in the future? These questions have challenged every generation of young adult that started investing and was caught in a market crash, but the depth of the cryptocurrency crash is particularly big on Gen Z as it was seen as a fast vehicle to wealth, accessible on mobile devices without needing a financial advisor, and viewed as a great equalizer for investors of any background and geography. 

“What we’re seeing is that these Gen Z investors are often stunned by how fast and how far their investments have fallen in such a short time. It’s important to remember that many in Gen Z have not been through a market like this as investors, so this is very new—especially those who really got into investing during the pandemic.”

The current stock market crash and cryptocurrency winter are a shock to every generation, but could be especially formative to Gen Z as they move forward as investors. It’s critically important that the generation not give up on investing but learn from this experience and apply lessons to become better investors as Gen Z has the most time to compound their gains of any adult generation right now! But that can be a hard pill to swallow when you’ve investing in Luna and saw it crash to zero or invested in the FANG stocks at all-time-highs and seen their previously untouchable valuations crater. 

There is no doubt that every generation of investor today has now seen the stock market go way up and go way down. The role and importance of diversity has been highlighted once again along with the need for being pragmatic about the risk that an individual investor is knowingly comfortable being able to take with their portfolio. 

The key to watch is whether the emerging generation of Gen Z investors can stay in the market through this tumultuous period of time, both filled with inflationary pressure and macro economic uncertainty, and become the experienced investors that will position them for the financial stability they say in our studies that they want to achieve. Or if they instead wait on the sidelines as their disposable income shrinks and either choose not to get back into investing or are unable to get back into investing and instead leave themselves at a long-term disadvantage to reach their financial goals because of the bubble that was caused by so much money being pumped into the system to prop it up during an unprecedented global pandemic. 

“Given that they often have the least disposable income, especially during these inflationary times, they are often not buying the pullback simply because they don’t have the liquidity on the sidelines.”

So far Gen Z investors appear to still be interested in investing but they are now significantly more aware of the risks, particularly as valuations have not bounced back but continued to steadily fall, and many in Gen Z are now taking a more “wait and see” approach. This is compounded by inflation which puts pressure on them to access the money they do have invested to help cover the rapidly rising costs of living. 

It is never a dull moment for our team at The Center for Generational Kinetics to study Gen Z! At CGK, we will continue studying this fascinating generation and their attitudes, beliefs, and behaviors about money, investing, financial risk, and their future.  As we continue our exciting research into this generation as they emerge, we will continue to share our latest discoveries with you. If you haven’t already downloaded our newly released State of Gen Z® annual research studies, please check them out here.

Thank YOU for being on this journey of research, insights, and discovery with us and Generation Z. Please reach out if there is a meeting or event where I can speak to you and your stakeholders about the hidden generational trends and solutions leaders, marketers, and employers need to know now!

Gen Z Investing Research


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