"A helpful metaphor for understanding the social impact of
baby boomers, from their birth to their retirement, was laid out in a book by David Cork, The Pig in the Python. The book describes how boomers in different stages of their lives pumped up earnings of certain businesses, in much the same way that the body of a recently consumed pig would expand a python's body as it passed through the snake's digestive tract. For example, when boomers were babies, diaper sales soared. When they reached college age, higher education flourished. And when they hit middle age, they made cholesterol-fighting statins blockbuster drugs.
Boomers gained their greatest financial clout in the early 1980s. It's no coincidence that this was the start of what became known as the Great Bull Market of the Century, which ran from 1982 to 2000. On August 6, 1982, the S&P 500 Index was trading at 103.33. Two decades and a lot of economic growth later, the S&P 500 closed at 1,527.86 on March 24, 2000--a cumulative total return of 1,379%, the strongest stock market in modern times.
But not all demographic trends make for strong stock markets.
Japan, the world's fastest aging country, is facing a problematic economic future. The country's current population of 128 million is projected to shrink 33% by 2060, according to Japan's Health and Welfare Ministry. By then seniors will account for 40% of all Japanese citizens.
Elderly can stifle growth
Just as a car won't start without gasoline, if there aren't enough young, productive workers in an economy, that economy is unlikely to go anywhere. That's precisely been the problem in Japan: a disproportionate--and increasing--amount of its economic resources are flowing to an aging population, which in turn has stifled growth there.
Japan's aging problem is nothing new; it began in earnest in the 1990s, and its economic effects have been reflected adversely in the Japanese stock market. The Nikkei Index, after reaching an all-time high of 38,916 at the end of 1989, lost 81% as of February 2009. The Nikkei has never so much as sniffed its former heights and languishes at about 8,000 today.
Italy is trapped in a similar demographic black hole, with a population that's been declining for decades. In 1964 an Italian mother bore an average of 2.7 children, according to the World Bank. By 2009 that average had fallen to 1.4 children. The Italian populace has been sinking below the replacement rate of 1.9 (the rate needed to maintain current population levels) since 1975.
This decline has taken a steady economic toll. During the 1990s, when Italy's economy began to wane notably, its gross domestic product grew on average 1.2% annually, trailing the European Union's 2.3%. Italy's labor productivity only grew 0.1% a year between 2001 and 2005, and it dropped by 0.8% annually between 2006 and 2009, according to The Economist. Not surprisingly, Italy is now flirting with fiscal insolvency, reeling from its fourth recession since 2001 and its nose-bleeding heights of public debt.
Who are millennials?
So, what's the demographic destiny of the United States? More to the point, are the economic prospects of the
millennial generation in the U.S. doomed to resemble those of their peers in Japan and Italy? And if those prospects aren't doomed, what distinguishing characteristics offer hope that the millennials and the stock market may enjoy a better fate?"
http://news.morningstar.com/article...ll2market2in2stocks.aspx?t1=1350912772&part=1
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