Up, Up, and Away

Anyone who’s ever taken high school physics or owned a cat knows that what goes up eventually must come down. An object tossed in the air will continue its path until the force of its velocity no longer exceeds the force of gravity and it falls back to earth. Cats operate on a much simpler principle: A cat up a tree will come down when it gets hungry.

But when it comes to the stock market, the reverse also is true: That which goes down will eventually come back up. At the spring JCK Show in Orlando, noted industry analyst Ken Gassman gave a keynote address about the subject that was most encouraging.

Will the recession end? Will the stock market go back up?

“It always does,” he said.

More importantly, he pointed out, it rarely stays down for long. Even after its most famous crashes (1929, 1987) the stock market actually recovered fairly quickly, but other factors were in place then that aren’t today, and thus the economy took a nosedive. But he predicts the stock market today should go up from here, and it should go up substantially.

More Americans own stocks than ever before. Whether it’s straightforward investments in companies or as part of a mutual fund or 401(k) plan, lots of people own lots of stocks. As a result, the stock market is the single most important factor affecting consumer spending and a good predictor of economic recovery. And it’s heading in the right direction.

Also, this recession is different from previous ones in that housing values rose about 9%. That kept consumers feeling generally okay about their fiscal future—and it kept them shopping.

Shopping is America’s true national pastime. There are some who believe happiness begins with the words “pitchers and catchers report,” but more of our collective time and money are spent at the mall than at the ballpark.

Blame the Baby Boomers. The “me” generation. The “I want it all and I want it now” generation. The generation that made stock ownership relevant for everyone, not just the robber barons. The generation that spends rather than saves and owns more stuff than it knows what to do with.

It’s also a generation that doesn’t own nearly as much jewelry as you might think. However, said Gassman, that’s all about to change. Affluence peaks at midlife, and historically consumers buy more jewelry between ages 50 and 60 than at any other age. And every day, 11,000 Boomers turn 50. They’re also beginning to inherit wealth, and typically, they’re probably going to spend a big chunk of it.

If these historic patterns repeat themselves, this industry is on the brink of a very prosperous decade.

Even more reassuring is the longer view. The generation that once didn’t trust anyone over 30 now has children approaching that age. Members of the Millennial Generation, a.k.a. Gen Y, the offspring of the Boomers, outnumber their parents (78 million to 76 million), and they too are major-league shoppers. More traditional than their parents in many of their attitudes, they also process information differently. (Internet-haters, beware!) Ultimately, despite the fact that Boomers are famous for hanging onto youth and nobody likes to think about his mortality, eventually that time will come for large numbers of them—right about the time Gen Y enters its peak affluence and jewelry-buying years.

What goes up may eventually come down, but the long-term prospects for the jewelry industry seem to be heading resolutely up. It may not work as an answer on a physics exam, but it surely works for us!