Investments and Demographics

BCA Research has published a special report about the economic implications of an aging global population:

• Global population growth has nearly halved over the past forty years and the labor force is expanding very slowly. 
• Health among the elderly in the OECD has been improving, but not quickly enough to compensate for the secular impact of aging.
• The reduced labor force participation rate among the 16-24 age cohort is reflective of deep social changes that won’t be easily reversed.
• A smaller potential workforce will not turnaround the slowdown in real wage growth because of technological destruction.
• An aging population and economic growth in the developing world will create an almost insatiable demand for health care services and products.
• Entitlement will increase as government revenues will be under pressure. Taxes have to rise.
• A more serviced based economy will have less need for energy.
• A smaller workforce means also a slower growing economy, as Japan is already experiencing.

BCA November Forecast

Latest Forecast from BCA:

• The monetary tailwind for global equity prices is strengthening, but the earnings support is weakening.
• It might be necessary to inject more fiscal policy into the mix to rekindle activity.
• Learned behaviors are still supportive of risk assets and more QE in Europe/Japan can be expected.
• Even if the Fed does raise rates in December we doubt more than one or two more will be in the cards.
• Stay neutral on equities, but position defensively and remain long duration in the bond markets.