MONGERS OF DOOM

‘Baby boomer’ is not a phrase that I particularly like, but then I’m not over-fond of putting labels on groups.  It also sounds a bit American, not that there is anything wrong with that of course, but it just jars a bit on my English sensitivities.  Anyway if you were born between 1946 and 1964 you fall into that category, like it or not.

Statisticians, as is their wont, come up with all sorts of information and figures about Baby Boomers.  There are the obvious implications including more competition to get into school and university, more job applicants, greater demands on social services and so on.  However, there are also more nefarious statistics.  For example, as we reached middle age we had an impact on the stock market because there were more of us buying shares with our income and savings.  It has been argued, with some logic, that we were responsible for the boom years because we bought more ‘product’ and invested more in stock markets.  House prices forged ahead because the population bulge created a demand that exceeded the supply.

The doom mongers are now predicting the opposite affect.   As we come up to retirement we are more likely to downsize our houses, consume less ‘product’ and we are likely to sell our shares to finance our retirement.  This apparently is going to result in depressed stock markets in those countries that actively participated in the Second World War.  Some doom mongers are predicting a fall in the American S & P 500 of something like 40% over the next 10 years or so.  Pessimists in general are having a field day.  Not only are stock markets going to be affected by Boomers selling shares, but companies will be less profitable; P/E ratios will fall; double-dip recession is inevitable, and all this is on top of a very shaky financial situation within the EU likely (according to the doom mongers) to bring about the demise of the Euro and/or the EU itself, at least in its present form.

So, what to do?  Where to invest?  How to rebalance our portfolios?  The answer is to buy pharmaceuticals; cruise companies; care home providers and other sectors that are likely to benefit from an aging population.  You might also like to think about  income generating asset classes.  Consider investing in areas like South America; sub-Saharan Africa; the Middle East or the northern parts of Southeast Asia (ex-Japan) where working populations are expanding.

On the other hand, be an optimist and say to hell with it all and just enjoy your retirement.  The next generation are unfortunately going to bare the brunt of this demographic anomaly because the longer-living Boomers are rapidly spending their inheritance.

It’s a hard life.