The “baby boomers” generation retires, the wall street falls: the demographic collapse that affects the scholarships

There is no lack of explanations for the slowdown that Wall Street knew this year. Scandalous evaluations, rates of interest high in real terms, political uncertainty at the peak and a public debt that flirts with non -ustanability. And yet, the biggest threat to the US stock market may not be the markets or Fed.

As Felix Martin warns in the BreakingViews a Reuters section, the factor that currently puts more pressure on the stock market than any other is the aging of the population.

The “theory of demographic collapse”, which caused panic in the 1990s, returns in force. The premise was simple and terrifying: the Baby Boomers generation (born between 1946 and 1964), as an unusually large generation, first invested large amounts as their salaries increased. But, years later – at the age of retirement – they would start to sell actions and bonds to far fewer buyers: the young generation X, writes the Greek publication.

Fears started for decades ago

The question, as the Guru of Investments Jeremy Siegel asked in 1998, was simple and direct: “Would it be time to sell? But who? Who will buy trillion assets from the Boomers generation?” The 1980s and 1990s seemed to confirm the first half of the prediction: the evaluations increased vertiginously, and the famous price-adjusted ratio of Robert Shiller increased vertiginos from 7 points in 1982 to over 44 in 2000.

But the disaster did not come. Bula Dot.com exploded, but then returned. The generation “Baby Boomers” has not been retired in mass: they continued to work, they remained healthier than previous generations, while the flows to the pension funds were consolidated. Above all, the globalization of markets has allowed the supply of shares to be absorbed by a global wave of demand: Europe, China and Japan bought massive American assets.

From demographic collapse to market crash

The “demographic crash” theory has been abandoned. It was replaced by a more optimistic one: the “melting of the market”, the idea that supporting policies, monetary relaxation and global currency will maintain the growing market for a long time.

But reality is different. Since 2021, the flows from US pension funds have been negative. The old “saving” have become net sellers. The massive sale of the “Baby Boomer” generation has begun.

The problem: there are not enough members of the next generation to buy everything that is sold. In 1990, there were 5.5 people of active age for every citizen over 65. Until 2023, the report had decreased below 4. The casanders of the 1990s had warned: if the demand did not keep up with the offer, the market could decrease by 30%. And maybe they were optimistic.

As the scenario re-decides. Two new demographic factors threatens to darken the future even more

First of all, the countries that have supported the Wall Street with their savings-Europe, China, Japan-they also grow old. The global investor who used to buy what the “baby boomer” generation sells now. The crisis is simultaneous, global and feeds on each other, explains the editorialist.

Secondly, the Baby Boomer generation has lost its political supremacy. Until 2010, they constituted over 1/3 of the voters. Since 2016, the millennials and generation Z have taken control. The political framework that favored globalization and markets for decades – low taxes, light inflation, liberal commercial policy – starts to shake.

The young vice -president JD Vance and his voters do not have the same interest in saving the economies of the Baby Boomers generation. And somewhere along the way, Wall Street remains without a safety net. “It is said that the ascending markets do not die of old age. Maybe this time they are wrong,” he concludes.

We will have to get used to the idea that the world will become an inflationary environment, say the authors of the book “The Great Demographic Reversal The aging of societies, the decrease of inequality and the revival of inflation” (Charles Goodhart and Manoj Pradhan).

The sudden worsening of addiction rates around the world means that addicts who consume, but do not produce, will overcome the workers who produce. The inevitable result will be inflation.

More and more of us will live longer lives, but where will resources come from? The 3 alternatives

More and more of us will live longer lives, but where will the resources that allow seniors will consume after retirement?

There are three main alternatives, say the two economists: the first is that retirement age should be much increased. Not in all professions, because there is a large number of occupations physical power decreases to an extent that makes the continuation of work after a certain age (firefighters, police, etc.)

The second alternative, say the two co-authors) is like workers to finance their own old agesaving more. But this depends on the expected generosity of state pensions and the myopia of those at work. It is very difficult at 25 to think about surviving up to 85 and visualizing the consumption needs of an elderly person. Of course, the lower the expected generosity of the state pensions and the longer the estimated retirement duration, the higher the individual saving rates.

The third channel is like the state to tax the workers more And to use funds to transfer resources to seniors, both for medical care and pensions. A key question is how the state will see the balance between the higher taxes for those who work and the generosity of pensions.

Also, let us not forget that seniors are a major electoral basin. Promises to maintain or increase pensions have often represented a significant part of the manifestations of populist political parties, e.g. in Italy in 2018.