Time flies, but who could forget Tom Cruise belting into the phone to Cuba Gooding, “show me the money!” in 1996’s ‘Jerry McGuire’. Cruise was playing sports agent back then, but looking forward at the baby boom generation’s impact on this country’s numbers, the market message remains the same.
“Baby boomers” are people born post WWII until 1964. My parents fit that bill. I’m what they call “Gen-X” (born between 1), and I was a born out of the super spike that countries from Canada to Australia experienced alongside that seen here in the USA.
In the USA, 76 million kids were born during the baby boom. That’s a lot of kids. Now they aren’t kids, but they do have a lot of money (provided they aren’t invested Bear Stearns, Lehman, Merrill, etc…).
Importantly, this demographic phenomena isn’t just local – it’s global. Per Wikipedia, “the UK baby boomers held 80% of the UK’s wealth” in 2004. That said, in times of economic duress, as we sit on the 96% position that we proactively allocated to cash, we want to refocus our time and energy on the big picture secular trends that we can invest in. This is definitely one of them.
All the while, do not underestimate or forget that we Gen-X’ers have lived through one of the biggest meltups in US stock market history. So rather than run out and listen to one of the many CNBC entertainers suggesting that every down day could be “the bottom”, sit back, and be patient. Context is always critical. From 1, we saw some of the most powerful bull market manias that we may ever see. As a result, “Millennials” (those born 1) were born on the equivalent of a US economic 3rd base. Do they get that?
What I do get, are the numbers. McKinsey was kind enough to issued their math on this subject in the September 2008 issue of ‘The McKinsey Quarterly’. Rather than repeat the obvious, I’ll let that math speak for itself in the table below, and we’ll look forward to speaking with our clients about the asset specific investment implications as we look towards 2015.
(Source: McKinsey Global Institute analysis)