Raphael Stevens

Three investor subsegments are showing signs of “significant and lasting growth,” according to new research from McKinsey & Company.
That includes women, who are poised to control much of the $30 trillion in investable assets owned by baby boomers by 2030.
Other segments poised to grow include new investors who opened accounts during the pandemic and hybrid affluent investors who are working with both self-directed accounts and traditional financial advisors.

Prasit photo | Moment | Getty Images

The U.S. wealth management industry is poised to grow by about 5% annually over the next five years, while certain segments of the investor population are positioned to see the biggest boost, according to a new report from McKinsey & Company.
Three investor subgroups, in particular, are showing signs of “significant and lasting growth,” the report found.

This includes women, new investors who opened brokerage accounts for the first time during the Covid-19 pandemic and hybrid affluent investors who are working both with traditional financial advisors and self-directed accounts.
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That’s as 2021 was a mixed year for the U.S. wealth management industry overall, with record-high client assets of $38 trillion but the slowest two-year revenue growth since 2010, at a rate of 1%.
“While we would say the industry has been resilient, we would also say it’s not been unscathed,” said Jill Zucker, a senior partner at McKinsey and one of the authors of the report.
“Really, the message for wealth managers is this is certainly not a moment to be complacent,” she said.

Women to take ‘center stage’

Women already control about 33% of investable assets — or $12 trillion — in the U.S.
And that is poised to increase over the next decade, with baby boomer males expected to die and leave money to their female spouses, who are often younger and have longer life expectancies.
By 2030, it is expected that American women will control much of the $30 trillion in investable assets owned by baby boomers.

Younger affluent women are also poised for growth as they increasingly take interest in their finances. About 30% more married women are making financial and investment decisions compared to five years ago, McKinsey noted.
While women tend to lack confidence with regard to investments decisions, they do not lack competence, Zucker noted.
It will be important for financial advisors to anticipate their different needs, such as emphasizing the well-being of the family over investment performance.
“Women are looking for something slightly different from their relationship with their wealth management institution,” Zucker said.

Active traders to continue to grow

Oscar Wong | Moment | Getty Images

More than 25 million new direct brokerage accounts have been opened since the beginning of 2020. Many of those new accounts are owned by first-time investors, as Americans were able to save more money during the pandemic.
The adoption has been fueled by developments in the financial industry, including the elimination of online brokerage commissions and increased access to fractional shares.
The high rate of growth amid the pandemic might not be here to stay. But there still will be accelerated expansion in the next 10 years, according to McKinsey, in part due to the low median age of 35 for these engaged investors.

Affluent investors take a ‘hybrid’ approach

More affluent investors are working with both traditional financial advisors and self-directed accounts.
In 2021, one-third of affluent households — those with more than $250,000 and less than $2 million in investable assets — were considered hybrid. That marks an increase of 9 percentage points in three years, according to McKinsey.

There’s just a desire to experiment … that we were not seeing in wealth management historically.

Jill Zucker
senior partner at McKinsey & Company

The growth is due to a combination of a desire for human advice and the affordability and ease of direct investing, according to McKinsey.
“There’s just a desire to experiment that we’ve seen across other aspects of people’s lives throughout the pandemic that we were not seeing in wealth management historically,” Zucker said.
Wealth managers who offer both direct brokerage and advisor offerings will be best poised to benefit from this trend, the research found.

Other trends poised to continue

The pandemic may have lasting effects on how affluent investors choose to get their wealth management advice, with only 15% looking forward to returning to in-person or branch visits. About 40% of high-net-worth investors with more than $2 million in investable assets said they prefer phone or video conferences for wealth management meetings.
There has also been an uptick in the share of wealthy and younger households interested in consolidating both their banking and investment accounts. About 53% of those under 45 and 30% of those with $5 million to $10 million in investable assets indicated they prefer to consolidate those relationships, according to McKinsey.

Those preferences may be driven by low management fees, the opportunity for high yield on deposits and the ease of transactions across the different kinds of accounts, the research found.
Alternative assets — such as private equity, private debt, real estate, infrastructure and natural resources — are showing up more often in individual portfolios. About 35% of 25- to 44-year-old investors are showing an increased demand for these assets, according to McKinsey.
Moreover, investors are also turning more to digital assets, including cryptocurrencies, tokenized equities, bonds debt, stablecoins, art and collectibles. Investors are adding these assets for multiple reasons, including the ability to gain exposure to new technology, inflation protection, experimentation or speculation.

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Walmart Chief Financial Officer Brett Biggs said the retailer’s own research shows consumers are paying attention to prices, even if they aren’t trading down to cheaper brands or buying smaller packages.
The big-box retailer said it has the same number of rollbacks, or temporary price reductions, as it did at the end of the first quarter in 2021.
“During periods of inflation like this, middle-income families, lower middle-income families, even wealthier families become more price sensitive,” CEO Doug McMillon said on an earnings call. “And that’s to our advantage.”

A shopper wearing a protective mask shops in a Walmart store on May 18, 2021 in Hallandale Beach, Florida.
Joe Raedle | Getty Images

Walmart Chief Financial Officer Brett Biggs said shoppers aren’t trading down to cheaper brands, buying smaller packages or skipping over discretionary items — but they are paying attention to rising prices.
“We haven’t seen any marked changes at this point in how they’re shopping,” Biggs said in a Thursday interview with CNBC. But, he added, “we do know, we’ve seen and we heard through our own studies that people are certainly focused on inflation and they’re seeing that in their daily lives.”

Inflation is driving up costs of food, fuel, vehicles and other everyday products across the country. The consumer price index rose by 7.5% in January compared with the year-earlier period, the fastest jump in four decades, according to the Labor Department. Food costs are up 7% over the past year — and grocery is Walmart’s largest sales category.
Those climbing expenses have become a focal point for investors, who are watching to see if and when Americans’ spending patterns change. Household budgets may get squeezed by a second factor, too: As the Covid omicron wave recedes, consumers may start to spend more on commuting or dining out.
Walmart’s fiscal fourth-quarter earnings topped Wall Street’s expectations and the company reiterated its forecast for the year. A portion of the retailer’s sales came from higher prices, but same-store sales, a key metric, expanded by 5.6% in the U.S. More than half of Walmart’s sales growth came from an increase in trips to the store and visits to its website, rather than inflation.
Biggs said the average American consumer “is still in good shape” due to a confluence of factors: low unemployment, rising wages and an increase in household savings during the pandemic. That may help explain why they are not shopping differently.
He said the retailer has both customers and shareholders in mind as it tries to walks the line between keeping prices low and profits high. He said Walmart tries to take a balanced approach as it raises prices on some grocery items and not others.

“Even though you may get costs being passed along in one part of the [shopping] basket, you may be able to do some things in the other part of the basket to make it work overall,” Biggs said.
In store aisles, Walmart uses big signs to advertise temporary price reductions — called rollbacks. Walmart U.S. CEO John Furner said on the earnings call Thursday that the retailer has the same number of rollbacks now as it did at the end of the first quarter in 2021.
CEO Doug McMillon added during the call that rollbacks tap into customers’ emotions and signal Walmart is still providing value amid inflation and uncertainty.
Many major consumer-goods companies sold on Walmart shelves, such as PepsiCo, Coca-Cola and Procter & Gamble, have already hiked prices — and warned more increases may be on the way.
McMillon said the retailer has frequent talks with brands and leans on its long relationships with them to hold down prices.
“The amount of communication between us and suppliers is always high,” he said. “It’s particularly high right now.” 
He said the retailer knows how to navigate spikes in inflation because of its experience weathering similar periods in Mexico and parts of South America. Plus, he said, when consumers focus on price, they tend to shop more at Walmart.
“During periods of inflation like this, middle-income families, lower middle-income families, even wealthier families become more price sensitive,” McMillon said. “And that’s to our advantage.”

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Sustainable Energy

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Aviation could face substantial challenges if it’s unable to decarbonize in a timely manner, according to the CEO of Airbus.
The environmental footprint of aviation is considerable, with the World Wildlife Fund describing it as “one of the fastest-growing sources of the greenhouse gas emissions driving global climate change.”
In Sept. 2020, Airbus released details of three “hybrid-hydrogen” concept planes, saying they could enter service by the year 2035.

A model of one of Airbus’ ZEROe concept aircraft displayed in Hamburg, Germany, on 18 January 2022.
Marcus Brandt/dpa | picture alliance | Getty Images

Aviation could face substantial challenges if it’s unable to decarbonize in a timely manner, according to the CEO of Airbus, who added that hydrogen planes represent the “ultimate solution” for the mid and long term.In an interview with CNBC’s Rosanna Lockwood on Thursday, Guillaume Faury — who was speaking after his firm reported earnings earlier in the day — said aviation would “potentially face significant hurdles if we don’t manage to decarbonize at the right pace.”
The environmental footprint of aviation is significant, with the World Wildlife Fund describing it as “one of the fastest-growing sources of the greenhouse gas emissions driving global climate change.” The WWF also says air travel is “currently the most carbon intensive activity an individual can make.”

Faury laid out a number of areas Airbus was focusing on. These included ensuring planes burned less fuel and emitted less carbon dioxide. In addition, the aircraft the firm was delivering now had a certified capacity for 50% sustainable aviation fuel in their tanks.
“We need to see the SAF industry moving forwards, being developed, being grown to serve airlines and to be able to use that capacity of 50% of SAF,” he said, referring to the sustainable aviation fuel industry. “We’ll go to 100% by the end of the decade.”
The above represented a “very important part of what we’re doing” Faury said. “The next one is looking at the mid-term and long-term future to bring to the market the hydrogen plane because this is really the ultimate solution,” he said, noting that a lot of engineering, research and capital commitments would be required.
In Sept. 2020, Airbus released details of three “hybrid-hydrogen” concept planes, saying they could enter service by the year 2035. The same month saw a hydrogen fuel-cell plane capable of carrying passengers complete its maiden flight.

More from CNBC Climate:

While there is excitement in some quarters about hydrogen planes and their ability to potentially reduce aviation’s environmental footprint, a considerable amount of work needs to be done to commercialize the technology and roll it out on a large scale.

Speaking to CNBC last October, Ryanair CEO Michael O’Leary appeared cautious when it came to the outlook for new and emerging technologies in the sector.
“I think … we should be honest again,” he said. “Certainly, for the next decade … I don’t think you’re going to see any — there’s no technology out there that’s going to replace … carbon, jet aviation.”
“I don’t see the arrival of … hydrogen fuels, I don’t see the arrival of sustainable fuels, I don’t see the arrival of electric propulsion systems, certainly not before 2030,” he added.
On the sustainable aviation fuel front, Faury’s comments represent the latest addition to a discussion that has become increasingly important in recent years as concerns about sustainability mount.  
Although the European Union Aviation Safety Agency says there’s “not a single internationally agreed definition” of sustainable aviation fuel, the overarching idea is that it can be used to reduce an aircraft’s emissions.
In terms of content, Airbus has previously described sustainable aviation fuels as being “made from renewable raw material.” It said the most common feedstocks “are crops based or used cooking oil and animal fat.”

Read more about clean energy from CNBC Pro

Last week, the director-general of the International Air Transport Association told CNBC that consumers would be willing to pay the extra costs associated with the uptake of sustainable aviation fuel.
“Sustainable fuels are about twice what you’re paying for … the traditional jet kerosene, so it does represent a significant hike in the airline industry’s cost base,” Willie Walsh said. “And ultimately, consumers will have to pay that, that’s far too much for the industry to bear.”
Long term, they would recognize this was the case. “This is such an important issue. Ultimately, they will be willing to pay,” he added. More

Walmart topped earnings expectations and reiterated its long-term forecast, which calls for adjusted earnings per share growth in the mid single-digits.  
The big-box retailer is a bellwether of inflation because of its huge store footprint, diverse customer base and heavy emphasis on groceries.
The company’s stock has underperformed on Wall Street over the past 12 months.

A worker delivers groceries to a customer’s vehicle outside a Walmart Inc. store in Amsterdam, New York, on Friday, May 15, 2020.
Angus Mordant | Bloomberg via Getty Images

Walmart topped quarterly earnings estimates on Thursday after shoppers turned to the retailer for groceries and gifts over the holidays and said it’s focused on value as some customers grow nervous about inflation.
The company said it’s on track to hit its long-term financial targets, which call for adjusted earnings per share growth in the mid single-digits in the new fiscal year. Growth at that pace is above average analyst forecasts. 

Shares rose more than 2% in premarket trading.
Chief Financial Officer Brett Biggs said in a CNBC interview that the discounter is closely watching price gaps as inflation drives the costs of meat and other foods higher.
“We know that consumers are focused on inflation, and we’re continuing to watch key item pricing to ensure that we help them through this,” he said. “This type of environment plays to our strengths.”
Yet he said growth is driving up Walmart’s total sales as store and website traffic increased 3.1% and the company gained market share in grocery in the quarter.
Biggs said the company’s supply chain costs were $400 million higher in the quarter than planned. As omicron peaked, Covid leave costs rose $300 million higher than expected, he said.

Here’s what the company reported for the fiscal fourth quarter ended Jan. 31, according to Refinitiv consensus estimates:

Earnings per share: $1.53 adjusted vs. $1.50 expected
Revenue: $152.87 billion vs. $151.53 billion expected

Walmart posted net income of $3.56 billion, or $1.28 per share, compared with a loss of $2.09 billion, or 74 cents per share, a year earlier. Excluding items, the company earned $1.53 per share. Analysts were expecting Walmart would earn $1.50 per share, according to Refinitiv.
Total revenue rose slightly to $152.87 billion from $152.08 billion a year earlier, above Wall Street’s expectations of $151.53 billion.

Walmart’s same-store sales in the U.S. rose by 5.6%, excluding fuel, matching the 5.6% expected by a StreetAccount survey. 
Walmart’s e-commerce sales in the U.S. increased 1% versus the year-ago quarter — or 70% on a two-year basis.

Walmart-owned Sam’s Club saw growth in both sales and membership. Its same-store sales jumped by 10.4% in the fourth quarter compared with the year-ago period or 21.2% on a two-year basis. The company does not disclose membership count, but said membership income grew by 9.1% in the fourth quarter.
Walmart raised the company’s dividend by a cent to 56 cents per share, and said it plans to repurchase $10 billion of its own stock in fiscal 2023. 
Shares of Walmart closed Wednesday at $133.53, down less than 1%. The company’s market value is $370.4 billion.
Walmart’s stock has underperformed the broader market. As of Wednesday’s close, shares of the company had fallen 9% over the past 12 months compared with 14% growth of the S&P 500 and 1% growth of XRT, the exchange-traded fund for the retail sector.
Read the company’s news release here.
This is breaking news. Please check back for updates.

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