Blackrock fixed income chief investment officer and Fed chair candidate Rick Rieder was on Bloomberg TV last week and brought up a point that’s been resonating with me since he said it.
He talked about a confluence of factors that’s unique to history and has no parallels:
- People are living longer and healthier
- A wave of baby boomers continue to hit retirement age
- They are very wealthy, and likely getting wealthier with the stock market really
The peak baby boom year was in 1957 (putting them at age 68) with the last boomers hitting age 65 in 2029. The cohort from 60-80 is going to be spending heavily over the next 10 years and are likely to remain in their own homes until the 2040s, continuing to travel and spend.
Rieder highlighted this chart:
I’d wager that even in the past few months, that’s expanded further as stock markets have climbed.
In short, the boomers are absolutely flush and will continue to spend for at least the next 10 years. It breaks all the economic correlations because their spending has virtually zero correlation with employment. There is a huge opportunity in markets to figure out how this will play out.
I think it’s ultimately inflationary, particularly in an anti-immigrant setting but there are many knock-ons. One spot that comes to mind is travel and airlines, which remain cheap parts of the market that I suspect will be more resilient than the have been in past downturns (whenever a downturn comes).
This article was written by Adam Button at investinglive.com.