4 demographic trends for the 21st century

Theo

On 26 Jun, 2009

50% of us over the age of 65 in 20 years... this will have so many implications on multiple levels.
We won't need industrial and consumer production. More of it will move out.
Unless we send all of our parents to Benidorm, there will be higher demand for old people goods & services.
Those under 65 will get poorer as result of increased taxes and rents burden, under one form or another.

At least with future medical advances, women might be able to have another batch of kids after they retire. This would double the rate of fertility per generation. If divorce rates and trends in gender ratio are maintained, it might even triple.

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Nick Doms

On 26 Jun, 2009

I am not sure whether there is a direct correlation between demographic movements and the performance of an equity market.

I agree that the shift in demographics will certainly impact the future global economic landscape, but tying the performance of a stock market to demographics to me sounds like far fetched.
I cannot find any technical data to support the theory nor does the GS graph really supports this if you look closely. There is actually a discrepancy and a disconnect between the two movements.
Secondly, the graph GS uses is an attempt to compare the savings rate to the equity market and not demographics.

Sincerely,

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Theo

On 26 Jun, 2009

Of course there is no correlation, even the paper says not to take this too seriously.

One of the cornerstones of the demographics argument in economics has been that of size - the bigger the better. This has been one of the drivers behind the EU expansion, wanting to rival with the 300 million strong US market.
Australia has understood the issues involved a long time ago and has devised a much better immigration policy, combining demographics diversity diplomacy and need for skills, which has proven its effectiveness.
Current PM Kevin Rudd majored in Chinese language and history and is fluent in Mandarin! His PhD supervisor was a Belgian born sinologist professor who left Belgium over 30 years ago. He must have gotten tired of everything being compressed down to the Flemish/French language divide and inability to see the big picture.
It's quality not quantity that matters!

More to the point, I don't see the correlation when one starts looking at the % of profits US listed corporations generate from operations abroad and also given the high % of foreign money invested in US listed stocks.
Funds retrieved from US stock exchanges after sept. 11 2001 by Middle Eastern investors alone account for a big chunk of subsequent events in the US economy and financial system. The tightened immigration rules for both students and employees at the time resulted in the rise of the BOI and ICT in India.

Prof. Amy Chua from Yale University has written a few interesting books on the subject with regard to demographics diversity and economy.

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incognito

On 26 Jun, 2009

demographics certainly affect the stock market, but the effect may be smaller than some fear (it's one of the many forces behind the performance of equity markets)

http://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID399742_code030522500.pdf?abstractid=399742&mirid=3

Considering together the issues of optimal response of saving to a demographic change on the one hand, and the effects of demographics on stock prices, on the other, leads to an important insight: if the conditions under which demographic change will have a large effect on the stock
market are satisfied, then a country’s ability to “save for its old age” is even more sharply limited than had previously been understood. Put differently, if demographics affect stock prices, then the controversial result of Cutler et al. is strengthened.

While the above insight depends only on the theoretical model, our attempts to parameterize the model and to use data on actual demographic change as an input show that the case for a large demographic effect on stock prices is fairly weak. For example, our theoretical model predicts that
there will indeed be a decline in asset prices in response to demographic change over the period 2010-2030, but the magnitude of the decline will be far too small to justify the term “meltdown.”

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oem sofware

On 22 Mar, 2011

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