One chart shows how difficult it will be for Gen Z to make money off the stock market – twice as hard as for millennials

• Gen Z will have a harder time building wealth than millennials did through stocks and bonds.
• They can expect average annual returns of just 2% compared to 5% of past generations, according to Credit Suisse.
• That implies Gen Z would grow $1,000 into $1,486 over 20 years – compared to $2,653 for millennials.
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It’s going to be twice as hard for Gen Z to build wealth as it was for millennials.

At least, through stock and bond investments.

The generation can expect average annual real returns of just 2% on their investment portfolios, according to Credit Suisse’s global investment returns yearbook. That’s a third less than the 5%-plus real returns that millennials, Gen X, and baby boomers have seen. Credit Suisse’s analysis took in average investment returns since 1900 and forecasted them going forward for Gen Z.

That difference sounds slim in the short-term, but looks a lot larger in the long-term. Imagine a millennial investing $1,000 for 20 years at the 5% return they’ve benefited from and a Gen Zer investing the same amount at a 2% return during the same time frame.

As you can see, the millennial stands to grow that $1,000 into $2,653 over two decades. The Gen Zer, however, only sees their investment increase to $1,486. That millennial has earned about 80% more, or nearly twice as much, as the Gen Zer.

This may not pan out exactly as Credit Suisse laid out, as reported by The Economist. For instance, deflation could increase bond returns, but the yearbook notes that inflation is more of a concern in the near future.

Building less wealth than millennials isn’t good news for Gen Z, considering that many members of the generation before them have long struggled themselves with building wealth. That’s due to myriad economic factors, like the fallout of the Great Recession, massive student-loan debt, and soaring living costs, that have all created an affordability crisis.

Now, Gen Z may be on the same path.

The pandemic will impact Gen Z’s financial and professional future in the same way that the Great Recession did for millennials, according to a December Bank of America Research report called “OK Zoomer.”

“Like the financial crisis in 2008 to 2009 for millennials, Covid will challenge and impede Gen Z’s career and earning potential,” the report reads, adding that the economic cost of the recession would hit the youngest, least experienced generation the most, just as it did a decade ago.

Recession graduates typically see stagnated wages that can last up to 15 years, Stanford research shows. Gen Z has been hit hardest in terms of unemployment. Those ages 20 to 24 had an unemployment rate of nearly 27% when the unemployment peaked last April according to data from the St. Louis Fed, more than any other generation.

Of course, stocks and bonds aren’t the only way Gen Z can catch up financially. There are other ways to build wealth, such as investing in real estate or by becoming a successful entrepreneur. Many Gen Zers have already embarked on an entrepreneurial path as early as their teen years, which could go a long way in wealth creation.

But the markets, which haven’t even been all that friendly to millennials, look an even harder bet for the youngest generation.