Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24
How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - 17th Feb 24
Why Rising Shipping Costs Won't Cause Inflation - 17th Feb 24
Intensive 6 Week Stock Market Elliott Wave Training Course - 17th Feb 24
INFLATION and the Stock Market Trend - 17th Feb 24
GameStop (GME): 88% Shellacking Yet No Lesson Learned - 17th Feb 24
Nick Millican Explains Real Estate Investment in a Changing World - 17th Feb 24
US Stock Market Addicted to Deficit Spending - 7th Feb 24
Stocks Bull Market Commands It All For Now - 7th Feb 24
Financial Markets Narrative Nonsense - 7th Feb 24
Gold Price Long-Term Outlook Could Not Look Better - 7th Feb 24
Stock Market QE4EVER - 7th Feb 24
Learn How to Accumulate and Distribute (Trim) Stock Positions to Maximise Profits - Investing 101 - 5th Feb 24
US Exponential Budget Deficit - 5th Feb 24
Gold Tipping Points That Investors Shouldn’t Miss - 5th Feb 24
Banking Crisis Quietly Brewing - 5th Feb 24
Stock Market Major Market lows by Calendar Month - 4th Feb 24
Gold Price’s Rally is Normal, but Is It Really Bullish? - 4th Feb 24
More Problems in US Regional Banking System: Where There's Fire There's Smoke - 4th Feb 24
New Hints of US Election Year Market Interventions & Turmoil - 4th Feb 24
Watch Consumer Spending to Know When the Fed Will Cut Interest Rates - 4th Feb 24
STOCK MARKET DISCOUNTING EVENTS BIG PICTURE - 31st Jan 24
Blue Skies Ahead As Stock Market Is Expected To Continue Much Higher - 31st Jan 24
What the Stock Market "Fear Index" VIX May Be Signaling - 31st Jan 24
Stock Market Trend Forecast Review - 31st Jan 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

This Is The Most Profound Shift The US Economy Has Ever Seen

Economics / Demographics Jun 08, 2017 - 03:07 PM GMT

By: John_Mauldin

Economics

By Stephen McBride : This year, the first Baby Boomers turned 70, and that spells trouble for the economy and financial markets.

Speaking at Mauldin Economics’ Strategic Investment Conference, chief economist and strategist for Gluskin Sheff, David Rosenberg, dissected the wide-ranging implications of the wave of Baby Boomers now retiring.


Fifty Million Americans Aged Over 70 By 2030

“1.5 million Boomers turn 70 [each year] for the next 15 years. This is a depressant for growth. Research has shown once you hit this age, you cut back on your spending.”

Findings from RAND Corporation show that on average, a person’s consumption drops by 37.5% when they enter retirement. Given that consumption accounts for 70% of US economic activity, this is a major deflationary force.

Rosenberg goes on to say, “what makes this situation more acute is that only half of the Boomers that would like to retire, and this is why they can’t retire, have less than $100,000 in liquidity.”

This huge funding gap in pensions has two major consequences for the economy and financial markets in the near term.

The Booming Bond Market

“Because [Boomers] are living longer and they need the cash flow, they’re staying in the job market longer and displacing younger workers. The fastest employment growth now is people over the age of 65.”


Source: Haver Analytics, Gluskin Sheff

“From a financial markets standpoint, once you hit the age of 65, you go through the most profound asset class shift since you were in your 30s. You start to trim your equity and start to raise your bond exposure.”


Source: Haver Analytics, Gluskin Sheff

Dividends Are King

While cash flow will remain king for Boomers looking to plug pensions deficits, Rosenberg sees one big problem which has huge implications for asset prices going forward: low interest rates.

“The big challenge is, if this [Boomers retiring] was happening 30 years ago, you could go to the government bond market and get 4, 5, 6%. You can’t do that today.”

One consequence of record-low yields on US Treasuries is that there have been massive inflows into dividend stocks. This in turn has left valuations sky-high. However, Rosenberg thinks money will continue to flow into the “bond proxies.”

“[Low Treasury yields] are why I don’t think the dividend theme is overdone. The equity market has become a more reliable generator of the reoccurring cash flows that the Boomers need than the government bond market has.”

Which Trends Should Investors Focus on Today?

For David Rosenberg’s thoughts on the deflationary headwinds facing the US economy, Federal Reserve policy, and more, watch the full interview below.

Download a FREE Bundle of Exclusive Content from the Sold-Out 2017 Strategic Investment Conference

Get access to exclusive interviews with John Mauldin, Neil Howe and Pippa Malmgren from SIC, an ebook from renowned geopolitical expert George Friedman and bonus SIC 2017 content…

Claim your SIC 2017 bundle now!

John Mauldin Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in