How baby boomers could depress stocks for decades

The aging generation could affect markets for the next 20 years by selling investments to finance retirement, researchers say.

By MSNMoney partner Aug 23, 2011 3:12PM

By Vivien Lou Chen, Bloomberg


Aging baby boomers may hold down U.S. stock values for the next two decades as they sell their investments to finance retirement, according to researchers from the Federal Reserve Bank of San Francisco.


Americans born between 1946 and 1964 are beginning to retire as the U.S. stock market is still recovering from the financial crisis that began in 2007 with the collapse of the subprime mortgage market. The timing is "disconcerting" and, since stock prices have been closely tied to demographic trends in the past half century, "portends poorly for equity values," adviser Zheng Liu and researcher Mark Spiegel wrote in a paper released by the bank Tuesday.


The equity-price-to-earnings ratio of U.S. stocks tripled from 1981 to 2000 as baby boomers reached their peak working ages and has declined since then, according to Spiegel and Liu. Overseas investors' demand for U.S. stocks might help mitigate the effect of a baby boomer sell-off, yet the impact would probably be limited, they said.


"For many primary purchasers of U.S. equities outside the U.S., their demographics are even worse than ours, in particular Europe and Japan, which have older age profiles prevailing than the U.S. does," Spiegel, the vice president of the bank's research department, said in a telephone interview today.


At the same time, foreign investors, including sovereign wealth funds, may decide to hold a larger share of U.S. equities, Liu and Spiegel said. Also, emerging market countries such as China may ease capital controls, allowing their citizens to invest in U.S. equities, they said.

"We're well aware that a lot of other things can happen" that would buffer the impact from retiring baby boomers, Spiegel said. "There's not necessarily a rule that this is the only thing that's going to drive prices going forward."


Still, "we do see it as something of a headwind as the economy is attempting to recover," he said.


The Standard & Poor's 500 Index has dropped about 28% since October 2007 and declined almost 11% this year.


Jeremy Siegel, a finance professor at the University of Pennsylvania's Wharton School in Philadelphia, has also researched the link between demographics and U.S. stocks. He said growth in developing countries should generate enough demand to absorb a baby boomer sell-off and "keep stock prices high."


As long as the economies of countries like China and India expand at an annual rate of at least 4% to 6%, investors "will have the resources to buy our stocks" and "keep our stock market fully valued into the future," Siegel, the author of the 1994 book "Stocks for the Long Run," said in a telephone interview.


"If we don't get growth abroad and block foreign countries from buying U.S. companies, the outlook for U.S. stocks is much worse," Siegel said.

More from Bloomberg


Aug 23, 2011 4:09PM
I had to laugh. Most baby boomers lost most of their investments in the 2007-9 market crash. What investments? The greedy crooks and totally incompetent people who control all aspects of our financial system managed to stop regulation of the industries and cheated us out of much of what we had invested. Of course the CEOs and rating agencies who cheated, lied and failed at their "jobs" got their money. Talk about rewarding incompetence and mindless greed. There is class ware fare. The rich against the rest, they won, big time. Heaven forbid we should have regulations to control these many un-indicted felons. Criminals always object to anybody who wants to control their unethical and criminal behaviors. What investments? They were mostly all stolden by those who call themselves professional financial experts. .
Aug 23, 2011 5:15PM
I am a baby boomer whether I like it or not.  I didn't have a choice.  Those are the facts plain and simple.  I can't and won't speak for other,  so I'll speak for myself.  When i got drafted out of high school to go fight a war I didn't understand or want any part of I went because that was what I was taught.  I came home with more holes in me then Swiss cheese.  Arriving at home feeling excited about returning to the place I loved.  I was assaulted at the airport and hospitalized, accused of being a murderer by what mike77 referred to as Hippies.  I recovered and began working and saving also like I was taught.  I saved in the neighborhood of $300K.  In 2000 after working sometimes 7 days a week.  I was laid off as part of a reduction in force.  For the next 2 and 1/2 years I couldn't buy a job of any significant so I threw newspapers, stocked shelves at grocery stores, hauled trash or anything else I could do to provide for my family.  During these times I managed to continue putting my 3 children in private school paying their tuition.  I went through nearly 250K during this time trying to keep my children from loosing a great education in a bad economy in a city where the public schools are terrible and shootings are a regular occurrence.  In 2004 I found a new job and began saving again.  In 2007 I was laid off again this time I was out of work for one year.  I now have 18K in my retirement and you that choose to criticize me and others like me who have worked all of their lives by the rules giving all they have to take care of their families are a disgrace to your parents and family.  Myself and a vast many other boomers are in my situation.  We didn't create this mess.  You that accuse are obviously not educated, short sided and self serving.  I have little or nothing to retire on and and what little I have I will continue to give to my children. Child 1 Speech pathologist who works with children.  3 out of ten for free.  Son 1 commercial pilot trainee. Cost of his education not finished to date 50K not including private high school and college. Son 2 High school senior in private school.  I've done my job and i'm broke.  because I chose to invest in my children.  Don't look for a handout.  Get off your butt and work like the rest of us so called lazy Boomers. One last thing.  now i work 3 jobs to equal what i made originally with one job.  I don't have anything to retire on so I have chosen to work until I am 68.  I'm not doing this to please you or anybody else I'm doing this because I taught to do the right thing.  Can any of you who criticize say that?  I think NOT!
Aug 23, 2011 4:34PM

Let's see..born in 1946.  You'll have to blame my parents for that.  Made sure I had an education so that I could work and take care of myself without any assistance.  Worked as a nurse for 28 years and saved as much as I could.  Made sure I would have medical insurance in retirement so that no one needs to take care of me since I'm not eligible for Medicare.  Bought a house and was upside down in it twice now, but stuck it out without going into foreclosure or bankruptcy.  Small house, 1100 sq. ft.  Nothing fancy.  I have a 9 year old Toyota. 

Now I'm being called fat and greedy and  told  that I have screwed everything up.  What are you talking about?  I'm not taking your money, just using the money I saved for decades.

Aug 23, 2011 4:52PM

It's kinda amazing. I am a retired boomer. I worked for 48 straight years and even worked part time after I retired. Paying full taxes the whole time. I never lived with my parents, gladly served my country and never ever failed to repay a debt.


I don't drive a big a$$ed SUV, I'm not over weight, don't drink or drug and don't ask anybody for anything.  Yep I'm the devil....


Congress,  state local and federal govt plus --- your dumb a$$ has known for 60 + years that the boomers were going to retire in the 21is century.  Sixty years to deal with this and all the other problems that have been on the table for all of those sixty +  years.


So sonny, I guess you'll have to get off your fat a$$ and do something for yourself.  It's sucks to be you...


I EARNED every second of my retirement now EARN yours and stop bitching.

Aug 23, 2011 4:15PM

Sorry you youngsters are not going to get the intitlement you believe you deserve. We are going to sell to finance our retirement. YOUR turn to save invest, sacrifice and grow old.

Your turn to boost the market with YOUR money. Time for you to grow up and do something for America and your future. We are tired, tired of your free ride and spoiled attitude.   YOUR TURN!

Aug 23, 2011 4:04PM

This has to be one of the dumbest articles i've read ina while. Is there anything we Boomers are not going to be blamed for? How dare we sell our stocks to provide for ourselves in our latter years. Give it a break.

Our youunger generations want to do something to ensure their future they better start having some kids or there isn't gong to be anyone to carry on our civiliztion never mind support them.Sad

Aug 23, 2011 4:51PM

Get a life people I am not a baby boomer and I really don’t care!! If they want to take their money out let them it’s theirs!!! What are you stupid!!!! That’s like you making a deposit then going to make a withdrawal and the bank telling you that you can’t. It’s their money they invested so shut the F*** up idiots



 Babyboomers VS Baby's: BOO HOO HOO Work for your own damn 50 year investment

 O and Entitlement?? People PAID cash for their social security insurance over a lot of years! Benefits aren't some kind of charity or handout!!  It's hard earned taxe's OUR Sweat, Blood and Tears 

Congressional benefits - free health care, huge retirement packages, 67 pd holidays, 3 wks pd vacation, unlimited pd sick days, from the moment they take office

Now that's welfare, and they (you) have the nerve to call SS retirement entitlements


Aug 23, 2011 4:39PM
good lord people stop blaming the boomers for everything you think is wrong with your life.  Would you rather we didn't have anything put back and had to rely totally on social security for our retirement income?  You get mad because people don't use any sense and save towards a retirement, now you're getting mad because we did invest in our retirement.  By cashing in whatever securities we may have invested in, it puts less of a burden on society and our families to support us in our declining years.  I have news for anyone that thinks we haven't contributed our fair share, because I've supported myself with no help from ANYONE since I was 15.  How many of you young kids can say the same?
Aug 23, 2011 9:49PM
Well I know I have a target on my back when it comes to Social Security and Medicare because I'm nearing 60, but blaming me for a sluggish stock market has got me wanting to find a nice isolated bunker somewhere. People my age were always being told to save because there likely wouldn't be enough to go around when we got to the table, so I saved. We were told to put some of it in stocks because otherwise it wouldn't grow enough to outpace inflation, so I put some of it in stocks. We were told not to touch it until retirement because that was what it was for, so I haven't touched it. Now when I am near the time of touching, I'm told that when I do, I'll be part of the reason the market doesn't grow for years into the future. I don't know if I believe that, but if you do and you're younger than a boomer, rejoice that you can buy low when you are young and have lots of growth to look forward to when you are old. But don't be surprised if "they" then start saying the same thing to you that this article is saying to us now. This piece is about as newsworthy as a dirty diaper in a day care center but it sure has pitted young versus old and vice versa. I wonder if that was the unspoken intention. While we claw at each other's throats, all sorts of nasty things can be hatched by politicians, financial wizards, and captains of industry. I wouldn't be surprised if this is the opening salvo in a plan to eventually prohibit anyone of any age from withdrawing any more than a set percentage from the stock portion of their 401K plans. To those boomers who are preaching about respecting elders and authority: I think you conveniently forgot your youth. We all should politely question authority, don't tell younger people not to do it, that is the road to dictatorship.  To those younger people who blame boomers for the economic and political decisions of the 70's and 80's that supposedly led us to where we are today: the members of the so-called Greatest Generation were by and large most active in the legislatures during those times as well as during the 60's with its happy gift of Viet Nam. Ultimately I think generational labels are perjorative and ought to be ignored. We are all in this together and much of the time I think we are being manipulated so that we are distracted from inducing real change by all banding together and rowing in the same direction.
Aug 23, 2011 6:13PM

I'm a Boomer.  Grew up during a time of no school lunches.  My divorced mother raised 4 children (with the help of faith) pretty much by herself.  I remember getting up at 4:30am to deliver papers in rain and snow storms.  Before school I usually had a piece of toast, and a bowl of oatmeal with butter, we couldn't afford milk.  My school lunch consisted of a peanut butter and jelly sandwich and maybe a carrot.  After grade school let out I was involved in seasonal sports and when I went to bed I was exhausted.


I served in the military during Vietnam.  I took advantage of the G.I. Bill.  I lifted myself up by my bootstaps and I am willing to help others who are  less fortunate.  I have always resented being forced help the lazy, or easilly influenced, or drug users or those faining false disabilities.  It's the old story of the ants of this world vs the grasshoppers.


 I remember the generation that proceeded mine.  Those were real heroes.  They believed that if you didn't work, you didn't deserve to eat.  They taught the generation that won WW2 in 1 room school houses with no air-conditioning or heat.  The teachers made up their own lesson plans and study materials for their students.


Be grateful for what you have.  Never Give Up and once you have it be good stewards.  Don't throw your money away buying the next gadget.  Figure out your needs from your wants.



Aug 23, 2011 4:38PM

"leave something for you"  is that really what you guys are typing here?!

How about you get some for yourself?


And before you slam all of the boomers, some of us are on the late 50's early 60's birth end of the generation, so the twenty plus years of those ahead of us, will ruin it for US, not you.


Help yourself. I can take care of me, thank you very much, Gen Xbox.

Aug 23, 2011 5:03PM
Wasn't that the point of these investments in the first place? to finance their retirement? 
Aug 23, 2011 4:37PM
My parents GAVE me nothing.  ANYTHING I have was worked for and paid for and SAVED.  Don't crybaby, get out there and build your own FUTURE knothead.
Aug 23, 2011 4:40PM
i'm sick of being blamed, i've had a job and paid taxes, not many people can say that any more!!
i've paid into SS for 40 years so far, you @$$holes blame everybody but those responsible for the problems we face, just take us "boomers" out and shoot us then. it won't fix the terminal greed of wall street or washington!!! up your @$$ msn dirtbag mofos!!!!!
Aug 23, 2011 5:25PM
jaxxmjd, Your right, we screwed up big time... by spoiling and catering to a bunch of sniveling, instant gratification indulging kids who now only know how to blame others for their own failures.
Aug 23, 2011 4:30PM
Boomers have spent 35-40 years earning a living. They can do what they want with their money................even paying more taxes
Aug 23, 2011 4:51PM
You kid`s better put the game controller down and get busy. My retirement is coming up soon.
Aug 23, 2011 5:44PM

I have a while before retirement as I am on the tail end of the baby boomer era and the bottom line is when I get to retirement I will do what I want with MY money that I saved for MY family. So to the current boomers that are retiring - God Bless you and enjoy doing whatever you want with YOUR money as no one else has a right to tell you what to do with it. The rest of us should do the right thing by saving for retirement and not expecting a handout. If you have no job find a way to get one - if you have no skills or education either fix that or suffer the consequences but by all means stop expecting something for nothing.


Retirees thanks for supporting the system all these years now go enjoy yourself!!! The responsible ones among the rest of us will hopefully meet you down the road with a beer in our hand.

Aug 23, 2011 4:45PM

What do you leave for us young people?


You were expecting a huge estate? You selfish little twitt!


 I'm a boomer and my poor parents left me squat. I put myself through college working the night shift in factories.  I earned what I have and I'll hand it off to my kids.You , on the other hand, are upset that you don't get an inheritance and will probably whine about it the rest of your miserable underachieving life.

No one owes you anything. Someone gave you life. Be grateful for that. The rest should be up to you.

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