Doom Spending Is a Pricing Signal, Not a Moral Failure

The shorthand is unflattering: Millennials and Gen Z, priced out of housing and worn down by inflation, are choosing experiences over savings. Call it doom spending if you like, but the label obscures the mechanism. What looks like nihilism is closer to a rational repricing of expected returns on patience. When the probability of homeownership collapses and wage gains feel illusory against shelter costs, the marginal propensity to consume rises — and the conventional consumption-savings model starts to break.

The New York Fed's work on the Survey of Consumer Expectations gives the behavioural story an empirical spine. Gizem Kosar and Davide Melcangi find that the relationship between marginal propensity to consume and perceived earnings uncertainty is increasing and concave: more uncertain households spend more of each additional dollar, not less. That inverts the textbook precautionary-savings reflex and complicates every incomplete-markets model built on the assumption that anxious consumers hoard. They do not. They spend, because the option value of saving has fallen relative to the certainty of consumption today.

The wage paradox

The macro picture sharpens the contradiction. Tyler Cowen notes that real, inflation-adjusted US wages are higher than ever. And yet the cohorts most exposed to the housing crisis register the strongest sense of financial unreachability. The disconnect is not a measurement error. It is composition. Aggregate real wages can rise while the price of the assets that define middle-class life — a house, a stable family formation horizon — rises faster. Research highlighted by Marginal Revolution finds that childless adults who do not expect to have children are 21 to 36 percent more likely to invest in stocks than those who do. Expected children shorten planning horizons; absent children, the horizon lengthens and the portfolio extends with it. Doom spending and equity allocation are two sides of the same demographic ledger.

For investors, the policy read-across matters more than the cultural commentary. If MPCs are concave in uncertainty, then disinflation surprises and labour-market easing will not produce the savings-rate rebound that conventional models predict. Consumption is being structurally supported by the very anxiety that is supposed to suppress it — at least until housing affordability moves materially. That has implications for terminal-rate pricing, for the duration

The investing layer of the same psychology is the one Barry Ritholtz keeps returning to. If the vast majority of market gains come from roughly one percent of stocks, and if selection and timing demonstrably fail, then broad indexing is less a recommendation than an admission. The doom-spending generation, to the extent it allocates at all, is converging on that conclusion faster than its predecessors — partly because the alternatives, from meme equities to crypto to sports betting, have already exhausted their narrative half-lives. The portfolio response to a foreclosed future is not gambling. It is, increasingly, capitulation to the index. That is a quieter outcome than the cultural panic suggests, and probably a more durable one.