The aging of America is increasingly looked at as a burden, on worries the healthcare and pension spending will blow out at the same time the remaining workforce gets depleted.
Taking a contrarian view, in a new report, is Deutsche Bank. “People are now working longer and are healthier than were people their same age 10/20/30 years ago. That means investment and consumption patterns will follow a different direction. A fiscal ‘cliff’ will be avoided,” say authors Luke Templeman, Olga Cotaga and Galina Pozdnyakova.
They note that life expectancy has risen and chart the rising median age as a proportion of life expectancy, which globally is now above 40% versus about 35% in 1986.
People are increasingly working beyond retirement age, and additional retirement years will mean they need higher returns on their investment. This means more stocks than bonds. They note a study the bank did in the U.K., showing rising equity ownership as people age, even though bond holdings remained fairly constant throughout their lives.
Citing Fed data, those over 70 in the U.S. own 29.5% of corporate equities and mutual funds, up from 21.7% in 1990. The 55-to-69 bracket own 45%, up from 37.2% in 1990.
The U.S. market is particularly well-placed, as the middle classes in richer emerging markets buy U.S. stocks for safety, say the Deutsche Bank analysts.
The U.S. also will have a larger share of 30- to 44-year-olds after 2030 than Western Europe or China — “this group is key to growth, innovation and consumption potential.”
The U.S. is one of the best-performing markets globally this year, with the S&P 500
SPX
up 11% so far. According to data from Citigroup, the U.S. is trading on 19.8 times this year’s earnings, versus the developed-market average of 17 and an emerging-market average of 12.9.
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