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Are "Baby Boomers" Driving the Stock Market's Trend?

Some fear that a swarm of retirees will doom the bull market

by Bob Stokes
Updated: March 20, 2017

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[Editor's Note: The text version of the story is below.]

The term "baby boomers" has become old hat by now, but just as a reminder, they're the generation born in the two decades after World War II.

They comprise nearly a quarter of the U.S. population. In 2014, according to the Population Reference Bureau, there were 76.4 million "boomers."

A school of thought that's been around for a number of years is that this large demographic group, with all of its investing power, must hold large sway over the stock market's trend.

The Elliott Wave Theorist examined this assertion back in November 1999:

It was discovered, when sliding birth data around on top of a chart of the stock market, that there is a four-decade correlation when birth data are moved forward 46-49 years. The explanation for this correlation … is that people spend and invest more when in their 40s, so the stock market will go up and down with the percentage of people in their 40s. It seems so sensible to the conventional mindset that people across the country have embraced this thesis.

The first problem with this case is that when data may be moved around at will, apparent correlations appear often. I can find three different multi-decade periods of correlation between immigration data and the stock market when I am allowed to slide the two series around until they fit. The second problem with this case is that the available data prior to the mid-1950s diverges so significantly from this postulation that it disproves any causality.

Even so, some people still correlate baby-boomers with the stock market's performance. A June 2, 2014 Wall Street Journal headline and subheadline read:

Will Demographic Trends Slash Stock Returns?
A Compelling Theory Says an Aging Population Will Restrain U.S. Growth

Of course, the logic flows that if boomers created the bull market, they could also stymy it by divesting from risky assets as they get older.

But how about the younger generation? Won't they step up to the plate, buy stocks and keep the bull market going?

Well, the Wall Street Journal also ran another story (May 29, 2014). The headline and article said:

Millennials Are Really Risk-Averse

More than half of people between the age of 21 and 36 have their savings parked in cash.

But, even with those concerns about baby-boomers and millennials in 2014, U.S. stocks went on to hit one record high after another.

And our publications have kept subscribers ahead of the trend. This is from our February 2016 Elliott Wave Theorist:

The September 18, 2015 issue of The Elliott Wave Theorist [showed] that the Dow Jones Industrial Average might have made a low for wave (4) within a continuing bull market. So far, prices have held above that low.

Instead of worrying about demographics, we focus on what really matters, the market's Elliott wave pattern. We suggest you do the same.

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