With rising incomes and a willingness to spend, Generation Z could have a profound impact on the economy and the market. The cohort’s global income levels are expected to increase from $9 trillion in 2023 to $36 trillion around 2030 and $74 trillion by 2040 — the largest of all generations, Bank of America said in a January note. In addition, more than $84 trillion in assets is expected to be transferred to younger generations, including Gen Z, by 2045, according to Cerulli Associates . At the same time, Gen Z is expected to grow their spending power to an estimated $12 trillion by 2030, according to NielsenIQ and World Data Lab’s global report on Gen Z spending . The oldest in the generation are in their late 20s, while the youngest are teens. Dates vary, with McKinsey putting the cohort’s birth years between 1996 and 2010, while McCrindle uses 1995 to 2009. NielsenIQ and World Data Lab said Gen Z is roughly defined as anyone born between 1997 and 2012. The generation was the first to be born into an online world, said Haim Israel, global strategist and head of thematic research at Bank of America. “They didn’t experience an offline moment in their lives and that has a huge impact on everything that they do — from consumer to banking to financial services to behavior to the health situation,” he said in an interview with CNBC. That will ultimately affect companies in those spaces. In addition, for the first time in history, the older generations are adapting to the younger generation, and not the other way around, Israel said. That means the impact is actually much bigger than just the size of the population, he said. “They are about to become the most disruptive to economies, markets and social systems,” he wrote in his January note. Gen Z’s impact on stocks The effect of Gen Z’s spending habits will be felt across a swath of sectors, including tech, retail and restaurants. One of the biggest and obvious beneficiaries is social media. Gen Z spends 2.5 hours daily across social media platforms, Bernstein said in an October report. Meta -owned Instagram is the social app most used by teens, with a monthly usage of 87%, according to Piper Sandler’s latest teen survey in October. The firm surveyed 13,000 teens across the United States. META 1Y mountain Meta Platforms Meta has also made a big push into short-form video, which is a draw for Gen Z. “This has demonstrated a very tangible result in terms of Instagram growing more popular, I would say, in the last three surveys that we’ve run,” said Piper Sandler analyst Tom Champion. He has an overweight rating on the stock and a $775 price target, suggesting 24% upside from Friday’s close. Different priorities While Gen Z’s spending power will evolve over time, it is already clear their priorities are different from previous generations. They spend a lot of time online, on social media, streaming content, playing video games and shopping. In fact, Gen Z is spending significantly more time playing games over the last decade than Americans of similar ages a decade ago, according to Bernstein. They also devote more time to eating and drinking and have sacrificed socializing, watching television and sports as a result. When it comes to shopping, they often start their journey online — both on e-commerce sites and social media. Some 53% of Gen Z said they have clicked “buy” buttons on social media networks, according to NielsenIQ and World Data Lab’s report. However, they also like to go to brick-and-mortar locations, whether to get an item faster, see a product in person or make it an experience. “The ability to see, touch and feel in person, to engage with sales associates, to be able to meet somewhere, it also goes to show that people want to be together,” said Dana Telsey, CEO Telsey Advisory Group, an equity research, investment banking and consulting firm focusing on the consumer space. Gen Z’s tech obsessions The digitally-native generation loves their smartphones, with 87% of teens owning an Apple iPhone, according to Piper Sandler’s survey. “The brand awareness is just fantastic,” investor Mark Malek, chief investment officer at Siebert Financial, said of Apple. “It’s the Coca-Cola of this generation.” While the tech giant may be lagging in artificial intelligence, it has always been a company that has been very measured in its releases, he said. When it comes to streaming content, the cohort turns to sites like Netflix and Alphabet ‘s YouTube, which are typically neck-in-neck for the top spot during Piper Sandler’s surveys, Champion said. However, the big disruption ahead may be reality versus scripted programming and long-form versus short form, as Gen Z flocks to short-form video and user-generated content, said Bernstein analyst Mark Shmulik. “Gen Z has taken reality/authenticity to a new level, creating stars from User Generated Content (UGC) on YouTube such as MrBeast, which averages the viewership of the Super Bowl, weekly,” he wrote. “But time matters, and while we’re spending ~18 minutes deciding what to watch on Netflix, Gen Z has consumed 40-50 videos on TikTok or Reels. Dollars follow eyeballs.” The generation also likes video games, but tends to access them differently than their older counterparts. “The majority of this group, who are tagged as digital natives, enjoyed their first gaming experience on six-inch mobile devices,” Bernstein said in its note. “It is reasonable to argue that gaming content has become more accessible with the growth of mobile penetration and is consumed more casually but more frequently by this younger generation.” Gaming platform Roblox saw a big jump in active users in Piper Sandler’s survey. Some 46% reported actively using it, up from 34% in the spring of 2024. “Roblox is aging up in terms of the user base, the content is growing more mature,” Champion said. “It’s potentially transcending gaming in almost being used as a quasi social media site.” He has an overweight rating and $73 price target on Roblox, implying 28% upside from Friday’s close. Retail stocks Amazon is the clear leader in e-commerce, with 52% of upper-income teens choosing it as their top online shopping site, according to Piper Sander. The tech giant has an average rating of buy from the analysts covering the stock and 34.5% upside to the average price target, according to FactSet. AMZN 1Y mountain Amazon Retailers like Target and Walmart should also remain on solid footing with Gen Z, thanks to their value and the convenience of their locations, Telsey said. She has outperform ratings on both names. Her $145 price target on Target suggests 26% upside from Friday’s close, while her $115 price target on Walmart implies 25% upside. In addition to liking both online and in-store shopping, Gen Z is open to trying new brands, but is big on loyalty, she said. For instance, Ulta Beauty attracts shoppers with its loyalty program and its independent brands, she said. Telsey has an outperform rating and $500 price target on the stock, suggesting 41% upside from Friday’s close. In fact, hygiene and health “are the new wealth,” with Gen Z focusing more on skin care versus makeup, according to Bank of America. That has stores like Ulta becoming popular among the crowd. Uggs, from Deckers Outdoor , and Birkenstock are also two brands that are trending with the generation, said Telsey. She has outperform ratings on both names. Sportswear should also be a beneficiary of Gen Z spending, according to Bernstein. “Sportswear remains a long-term secular growth sector — despite a short-term slowdown in 2024, the ongoing mix-shift within the closet, compounded by demographic shifts as Gen Z grows in the spending mix, will likely drive a steady tailwind for the next two decades,” the firm wrote. While brands matter, so does fashion, analyst Aneesha Sherman wrote in Bernstein’s report. Adidas and On Holding are good examples of that, she noted. The growth of fintech The generation has also turned to technology to manage money, with payment apps replacing cash. “They’re going to spend a lot of their money through the Venmos and Paypals of the world,” said Luke O’Neill, portfolio manager of the Catalyst Dynamic Alpha Fund. “They are already big users of buy now, pay later services.” William Blair initiated coverage of buy now, pay later company Affirm Holdings and financial services firm SoFi Technologies in January with outperform ratings. “We believe that alternatives to traditional consumer finance and bank cards will gain momentum as younger demographics seek better, more transparent financial experiences,” analyst Andrew Jeffrey wrote in a note to clients. Gen Z members are also turning more toward brokerage and high-yield savings accounts versus traditional banks, said Siebert’s Malek. “I think you’ll see more money shift away from full service broker dealers, a little bit more toward the, dare I say, Robinhoods of the world, Wealthfronts of the world, where they can almost self direct with a little bit of help,” the investor said. HOOD 1Y mountain Robinhood Robinhood is a top pick of Morgan Stanley analyst Michael Cyprys. He believes the company will gain market share “as the platform curates more content at an accelerated pace to win share from Gen Y/Z that’s moving into prime earnings years,” he wrote in a Feb. 10 note. After Robinhood reported earnings last month, Cyprys raised his price target to $90, suggesting 103% upside from Friday’s close. Dining While Gen Z isn’t spending a lot right now on dining out, they already exhibit a higher propensity for it rather than cooking at home, Bernstein analyst Danilo Gargiulo said. He continues to like Yum Brand’ s Taco Bell, Wingstop and Chipotle Mexican Grill because of their social media presence and cultural relevance. He also believes McDonald’s and Starbucks can leverage their scale to bring in more Gen Z diners. Catalyst Dynamic Alpha Fund’s O’Neill said Gen Z’s focus on health impacts its dining options. “There’s a focus on more organic or sustainably sourced items,” he said. “Traditional fast food [is] not a big beneficiary here at all, but more of your healthier options, like Chipotle, like Cava and those sorts of fast-casual dining are far more beneficiaries than McDonald’s and Wendy’s.” They also like to get their food delivered to them. DoorDash was the most popular food service with 75% of teens, Piper Sandler’s survey found. The bottom line Cleary, many of the stocks that will benefit from Gen Z’s spending may hit near-term headwinds, particularly around the Trump administration’s tariffs . However, while the impact of Gen Z’s behaviors may seem far off, it will actually be felt much sooner than many realize, Bank of America’s Israel said. “In the next couple of years, every industry will understand that there’s a tectonic change over here,” he said. “This shift in thinking is going to happen in these five years, before they will be the richest generation and every industry…
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