Baby Boomers Will Suck Massive Amounts of Capital From the Market, Says Demographic Expert

Baby Boomers have been a huge tailwind for equities and bonds from the 1980s until today, but now as they exit the workforce and increasingly move into retirement, this monumental demographic shift will exert enormous pressure on interest rates, bond prices, and equity market valuations.
This is the thesis of Will Denyer at Gavekal Research who we spoke with on our FS Insider podcast last week (see Major Demographic Shift Underway Spells Trouble for Bond Market).
Here’s what he had to say…
WWII to Present
From 1946 to 1980, we saw a booming population that resulted in increased demand for houses, schools, cars, and a wide range of consumer goods and services, Denyer stated. This created a tendency for upward pressure in prices and interest rates.
‘Then everything reversed basically in the early 1980s,’ he said. Boomers entered the workforce en masse and, starting around 35 years of age, Boomers entered their peak earnings, peak production, and peak savings period, which lead to an abundance of capital and production, placing downward pressure on consumer prices and interest rates.
Savings not only bid up the price of bonds while driving down yields but also bid up the valuation of equities. What developed was a long-term bull market in bonds and equities.

This post was published at FinancialSense on 11/22/2017.