Don Coxe, a respected portfolio strategist with some 40 years of experience, used to say that investors should focus on page 16 of the newspaper, not the story on page one. This is a metaphor for the reality that whatever the media is making their lead story on page one is already priced into the markets, while anything on page 16 is not priced in, nor is it getting the attention it deserves.

What are the page one stories today? INFLATION, RISING INTEREST RATES, UKRAINE, and GOVERNMENT DEBT

 

What is the page 16 story? The impact of Millennials on the world economy.

We all know the story of the Baby Boomers born between 1947 and 1965, and the impact that they had on the world, however, the children of these boomers, the millennials, are being ignored and no one is talking about them or the impact they will have on the economy. Born between 1982 and 1999, depending on who you ask, this cohort numbered 13.5 million more than the Baby Boomers in 2020 and are aged 23 to 40 today. As this generation goes through their life cycle, they are like a pig going through a python and are, or will be, putting demand pressure on some very meaningful and important parts of the economy.

Housing is a big one, as they buy their first homes. First homes are typically purchased between the age of 25 and 45 and this generation will be no different than any other. They will not live at home forever and they will buy homes like everyone else did.

They will also unleash consumerism like it’s never been seen before, as they earn income and buy things just like previous generations did when they move out of mom and dad’s house and start their own families. Think about 82 million people going into their peak consumption years and what that means for economic growth, tax revenue and the ability of governments to finance debts or pay them down.

Globally, as China feels the possible effect of the one-child policy – a declining working-age population, North America, with its smaller population, should maintain its working-age populace, possibly driving manufacturing back home as companies look to establish a local workforce and to exert increased domestic control over their processes.

There are many things to ponder today, but the thoughtful person will look beyond the headlines and see the demographic waves that are coming. These tailwinds are encouraging for the long-term economy and investors should be positive about the future.

Randy and Ian

Chart source: knoema.com

Image source: housingwire.com