Generation Rent is contributing to the low growth economic environment because they’re not buying enough goods, says Old Mutual Global Investor’s Richard Buxton.
However, the Old Mutual UK Alpha fund manager says that companies on the ground are less pessimistic than investors and policymakers when it comes to the economy.
Today’s generation just has a phone they replace once a year, Buxton told the Morningstar Investment Conference, and they do not save all their money for new equipment the same way previous generations have.
“Generation Rent doesn’t want to buy things for their home because they don’t own it,” Buxton says. “They want to spend it on travel and experiences and that is part of the reason why we’re experiencing such a low growth environment.”
Buxton says he believes in the term “peak stuff”, which was used by Ikea’s head of sustainability Steve Howard at a conference earlier this year to describe how the consumption of many goods in the West was reaching its limit.
Buxton’s comments follow yesterday’s FTSE rally of leisure and travel stocks.
Weaker oil prices saw gains by budget airline EasyJet, which rose 3.8 per cent, while travel firm Tui rose 3.7 per cent. Hotel and coffee shop operator Whitbread, which Buxton has been adding to recently, was up 2.6 per cent.
Gains in the sector were offset by a slump in mining stocks, with the FTSE 100 ending Monday down 0.2 per cent.
However, Buxton told the conference: “The world of the corporate is not quite as gloomy as the world of the market. Unfortunately for me as a stock picker, the macro dominates.”
When it came to stock picks, Buxton says he prefers unloved Barclays compared to British American Tobacco, saying it will make far more money than the tobacco company over the next three years.