🎙️ Burritos to Lattes

For the first time in over three years, CPI is below 3%. Hip, hip, hooray!

The July consumer price index report registered the 12-month inflation rate at 2.9%, the lowest since March 2021. This likely signals a September rate cut is coming.

Of course, as you’ll see below, everyone’s inflation rate is a bit different, depending on everything from where they live to the types of goods and services on which they spend their hard-earned bucks.

— Matthew & Shawn

Here’s today’s rundown:

Today, we'll discuss the biggest stories in markets:

• The dramatic turnaround in Millenialls’ finances

• The big shakeup at Starbucks

This, and more, in just 5 minutes to read.

Chart(s) of the Day

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In The News

🤙 The Dramatic Turnaround in Millennials’ Finances

Many headlines state how badly Millennials are struggling, but the numbers tell a different story. 

Millennials — aged between 27 and 44 — have been getting wealthier and wealthier. They find themselves wealthier than previous generations were at the same age. 

• One father and CFO in Kansas City told The Wall Street Journal: “I’m in a place financially that I couldn’t have imagined coming out of college. At age 37, my net worth is closer to what I thought it’d be at 47.”

On the rise: The financial fortunes of Millennials have shifted in major ways. The median household net worth of older Millennials, born in the 1980s surged from $60,000 in 2019 to $130,000 in 2022. Meanwhile, the median wealth for younger Millennials born in the 1990s quadrupled from $10,250 to $41,000. 

• In 2023, a Federal Reserve survey found that 66% of Americans aged 30 to 44 felt they were doing at least “OK” financially, a jump from 55% a decade earlier.
  

• Early this year, Millennials had an average 401(k) account balance of $59,800, a big increase from $27,600 in 2019. 

More numbers to know: A St. Louis Fed analysis reveals that by early 2024, Millennials and older members of Gen Z had, on average, about 25% more wealth than Gen Xers and Baby Boomers did at a similar age. As one senior researcher said, “They’re no longer lost. They’re found.”

The primary driver: real estate. Millennials saw their housing wealth grow by $2.5 trillion, thanks to soaring home values. Many owners who managed to purchase homes in the early 2010s or just before the recent price hikes have benefited the most.

Why it matters:

The surging stock market since March 2009 has really, really helped. Just as many Millennials were getting started and building their careers, the market bottomed and then soared to an extraordinary run. 

To be sure, not all Millennials are sitting pretty. Student debt burdens are real, as is a lack of current homeownership opportunities. Rising childcare, healthcare, and housing costs raise more questions about their financial stability. They are projected to live longer than baby boomers, necessitating careful long-term planning. And the wealth gap within the Millennial generation has widened compared to their predecessors.

Aging well: Economists point out that many Millennials have college degrees, which tends to lead to higher lifetime incomes. They’re also having fewer children, which eases financial burdens. 

• One survey revealed that 62% consider vacations a high priority in their households, compared to 54% of adults overall. The emphasis on leisure stems from their formative experiences during the 2007-09 recession, as noted by one analyst: “They realized they can lose their stuff to forces outside their control. But nobody can take their memories from them.”

While Millennials currently hold about 9% of U.S. household wealth—a figure that may seem modest—it’s worth recognizing that net worth typically increases with age.

Read more

More Headlines

📈 U.S. producer inflation slows as pricing power diminishes

😨 Top Wall Street exec at Oaktree predicts ‘social unrest’ due to AI

🏋️‍♀️ Blink Fitness, Equinox-owned gym chain, files for bankruptcy

🛍️ Macy’s closures will set off a wave of change at shopping malls

💸 Real wage growth by income group in the U.S., charted

✂️ DOJ is considering breaking up Google, among other options

😮‍💨 How Bank of America ignores its own rules meant to prevent dangerous workloads (WSJ)

☕ Starbucks Ousts CEO, Names Chipotle Boss as Replacement

From burritos to lattes — from one iconic American brand to another. That’s the path for star leader Brian Niccol, the Chipotle CEO, who is taking the helm of Starbucks next month. 

The coffee giant needs an infusion of fresh ideas to revitalize its brand and boost flagging sales. Could Niccol be the guy they need? Niccol, 50, has been credited with turning around Chipotle after its litany of food safety issues. Soon, he’ll replace Laxman Narasimhan, who is stepping down after a brief tenure of just over a year. In the interim, Rachel Ruggeri, Starbucks' Chief Financial Officer, will serve as the acting CEO.

Soaring to new heights: During his six-year tenure at Chipotle, Niccol oversaw remarkable growth, nearly doubling the company's sales. Successful marketing, new products, and a loyalty program helped Chipotle’s operations. The stock soared about 800%. 

Identity crisis: Six years ago, Niccol had to get Chipotle out of a pickle. Now, Niccol inherits another challenge at Starbucks, which is facing declining sales and an identity crisis — premium coffee chain, drive-thru place for $6 drinks, or something else? — and the issue of balancing mobile orders with the traditional cafe experience. 

• Then, there are questions about more competition in key markets like China (Luckin Coffee has surpassed Starbucks as China’s biggest coffee chain by sales) and navigating boycotts in some regions due to geopolitical issues. Oh, and if that’s not enough, how about attracting inflation-weary customers back to stores?
  

• Niccol will also manage a much larger operation: Starbucks has about 10 times more stores worldwide than Chipotle.
  

• “Starbucks is altogether more challenging,” one analyst pointed out. “He will need to push through the change that the world-famous coffee chain desperately needs while balancing the demands of activist investor Elliott Management.”

Why it matters:

So far, investors are ecstatic about the news. Starbucks shares jumped about 24%, recapturing all of its losses for the year. 

It’s worth noting that Starbucks shares are flat over the past five years, while Chipotle stock has jumped over 214% over the same period.

Transforming: Elliott Investment Management, an activist investor, called the appointment a "transformational step forward."

• Said another retail analyst: “This isn’t a case where a dramatic shake-up is needed to deliver value to Starbucks investors. It’s about doing lots of small things better.” I’d say he’s off to a good start: His appointment alone generated $30 billion in market value for the coffee chain.”

Bottom line: As Niccol prepares to take the reins at Starbucks, the coffee industry and investors will watch closely to see if he can replicate his success and breathe new life into one of the world's most recognizable brands. For starters, on a positive note: Margins on beverages are much better than those on food.

Read more

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Quick Poll

On Monday, we asked: What aspect of home buying makes you the most nervous?

— Most readers and investors cite affordability as the aspect of home buying that makes them most nervous today. “It's almost impossible for the current working generation to find affordable homes in big cities. I don't think I can ever buy a home…I can see many other people in similar situations in big cities.”

— Another reader brought perspective: “I guess each generation has its challenges; for the Millennials, it's housing affordability and wage competition. Boomers also had their fair share of challenges like the Vietnam draft.” Said another: “I graduated in December of 2020. I can find a plethora of homes I would have been able to afford 4 years ago that have since doubled their price and have become out of reach.”

— Said one more: “My wife and I are in our 40s, both make 6 figures, could put well more than 20% down on most things, and live in one of the cheapest ‘cost of living’ states in the midwest and cannot find anything worth pursuing.”

See you next time!

That's it for today on We Study Markets!

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