Demographic Cycles

April 08, 2024

Wouldn’t it be nice if we could look at demographics and determine whether the stock market and our home values are going up? There has been much study on Baby Boomers, Millennials, and other generations about how demographics affect the overall asset markets. Unfortunately, it isn’t clear and definitive that these cycles in population have a broad-based effect on the overall market.

While there aren’t clear signals for the overall market, there are certainly sectors of the economy that grow significantly with the generations. Think about the senior living and medical industries that have been growing as Baby Boomers age. This growth has been exaggerated due to longer life expectancy and more active senior citizens. They don’t even like being called senior citizens anymore, go figure.

When we look at the Baby Boomer generation, we see they were born after WWII, and the population was bursting at the seams for the next 20 years. The U.S. entered a maturity as a country that hadn’t occurred before. As the Baby Boomers entered a new phase of life, the economy adjusted to serve their needs. We saw growth in housing, stocks, schools, vacation, technology, medications, etc.

The generation following the Baby Boomers is Gen X. Since Gen X is smaller, it will not require additional infrastructure to serve Gen X for the same services. There will be differences in preferences, which will have some effects. After Gen X comes Millennials. The Millennial group is as large as the Baby Boomers, but because the Baby Boomers lead the way, there probably won’t be as much adjusting to the Millennial generation. There are noteworthy differences: Millennials were slower to purchase their first homes. They are more likely to have a two-income household. They will extend the vacation habits of their parents and are now bringing work-from-home to the conversation of every job interview. Covid policies accelerated these conversations.

Some people say that when Millennials reach their 50s in a decade, we should expect markets to crash as the Millennials get more cautious and prepare for retirement.  I don’t think it will happen like the predictions imply. Millennials will inherit more wealth than any generation before them. They will be planning for an active and long retirement, and they may be successful at working virtually, traveling while working and vacationing. We may see an entirely new way of aging that I can only speculate about today. We will have to wait and see.