By Simon Bond

Mean Reversion is a theory suggesting that prices and returns eventually move back towards the mean or average. This mean or average can be the historical average of the price or return or another relevant average such as the growth in the economy or the average return of an industry. 

As the boomers fade away into retirement and the millennials make their impact felt across the world; markets in general may see a "reversion to the mean".

Earnings for S&P 500 corporations continue to surprise to the downside. Year end 2015 estimates for S&P operating earnings now sit at $111, when they were $136 exactly one year ago today.  That’s a full 20% drop–but the S&P has only fallen 10%. Is there any reason that it shouldn’t fall another 10%, to catch up? 

Millennials, America’s largest generation by population, are soon to enter their earning prime. With a majority of this generation now in the workforce, they currently command an estimated $1.3 trillion in annual consumer spending. Where will this generation direct their wallets?

A new report from the New York Federal Reserve shows older Americans have been ramping up their debt while younger Americans have not. In real terms, debt in the hands of Americans between 50 and 80 years of age has increased by 59% since 2003. At the same time, the aggregate debt of those age 39 has dropped by 12%, the report released on Friday February the 12th shows. That same trend played out for auto loans as well — on a per-capita basis, auto debt is up 29% for those 65 years old, but it’s down 6% for those 30 years old.

Eventbrite’s nationwide research of millennials (defined as Americans born 1980-1996, now ages 18-34) conducted by Harris, reveals this generation not only highly values experiences, but they are increasingly spending time and money on them: from concerts and social events to athletic pursuits, to cultural experiences and events of all kinds. For this group, happiness isn’t as focused on possessions or career status. Living a meaningful, happy life is about creating, sharing and capturing memories earned through experiences that span the spectrum of life’s opportunities.

With millennials now accounting for over one fourth of the total U.S. population, their high focus on experiencing life supports the growth of an economy driven by the consumption of experiences.

The combination of this generation’s interest in events, and their increasing ability to spend, is driving the growth of the experience economy. When it comes to money, ‘experiences’ trump  ‘things’: More than 3 in 4 millennials (78%) would choose to spend money on a desirable experience or event over buying something desirable, and 55% of millennials say they’re spending more on events and live experiences than ever before.

For past generations, owning a first car was a rite of passage. Buying a first home signalled achievement of the American Dream. These life milestones were once important factors for identity-creation. But millennials aren’t as interested in owning a home or buying a car as previous generations were at their age. True now more than in past generations, for millennials, real value is derived from experiencing, not possessing.

The experiential nature of millennials presents a growing opportunity for businesses to leverage experiences to increase their value. Companies with these components will capture this added economic value and win the hearts of consumers.