Strategist David Rosenberg named demographics the single most important factor for financial analysts and investors to monitor over the next decade.
“If it’s all about ‘follow the money,'” wrote Gluskin Sheff’s Rosenberg, “then it is ‘follow the boomers.'”
“Nothing is more important than this if you are looking at what will fundamentally influence the financial markets for the next decade-plus,” he added.
The first of the baby boomers turned 70 this year, with another 1.5 million reaching that milestone each year for the next 15 years.
Crediting these demographic aging trends with the continued, “lower for longer theme” — lower growth, lower inflation and lower bond yields — Rosenberg noted that the markets’ biggest surprise this year after the election of President Donald Trump was not the stock market.
Source: David Rosenberg, Gluskin Sheff
“It has clearly been the bond market, as the yield on the 10-year Treasury note, instead of breaking to or through the 3% threshold, never did come close and now resides south of 2.3%,” added Rosenberg.
“Aggregate growth in incomes and spending will be decelerating, and that will be posing additional deflationary pressures in the economy, and this in and of itself will ensure bond yield remain extremely low.”
Rosenberg’s research also found that as a cohort, boomers spend more on “experiences” like leisure, hospitality, recreation, entertainment and travel.
“As a share of income, those 65 and older actually dole out more on these services than the folks in the age groups behind them.”
According to the latest Transamerica Retirement Survey, some 65 percent of baby boomers cited travel most often as their top dream for retirement, above spending more time with family or pursuing hobbies.
But to be sure, travel and hospitality aren’t the only industries Rosenberg suggests investors eye as the U.S. population ages.
Biotech and medicine are positioned for continued growth as boomers consume more and more health care.
Spending on health care accounts for 16.6 percent of U.S. GDP, 5 percentage points more than Switzerland, the next closest country.
The iShares Nasdaq Biotechnology ETF (IBB) is up 23 percent year to date, hinting at strong growth in large pharmaceutical and other biotech companies in the coming years.