What Does the Population Growth Bust Mean for Investors?

With fewer births to populate tomorrow's workforce, opt for health care and tech stocks, says BofA’s Quinlan.

Back in the 1970s, the big fear was a “population explosion”—an expected surge in the world’s populace that seemed to threaten to outstrip its resources, leading to wars and famines. But that dire scenario didn’t happen.

Declining fertility rates and shrinking labor forces are the trends now making the future look perilous. As Joe Quinlan, head of market strategy for Bank of America’s Chief Investment Office, warned in a note to clients, “the growth rate of any economy is dependent on population growth. The larger the population, the greater the labor force, the more capacity for consumption as workers per capita increases, and the deeper the base of taxpayers to support retirees.”

What does that mean for investors? Slower economic growth, low interest rates, and deflationary pressures.

Where does Quinlan suggest that you should channel your investments? To healthcare and technology, specifically robotics, automation, and artificial intelligence. Health stocks because an aging population will need more care, and the tech solutions, as they would take up the slack from an insufficiently large human labor force.

These alternatives, he wrote, mirror “the new normal of global demographics.”

For a glimpse of the future, Quinlan points to Japan, whose three decades of economic stagnation dovetail with its diminishing population growth. And the same is happening in Europe, he noted.

Citing United Nations statistics, he pointed out that the populations of 55 nations are expected to lose 1% between 2019 and 2050.  Studies show that 2.1 children per woman is the number that keeps a population expanding, but the latest US rate dipped to 1.72 last year. In 2018, for the first time in history, the number of people over 65 in the world exceeded those under age 5.

As Quinlan put it, “Babies matter.”

Related Stories:

No. 1 Economy-Affecting Trend for the Next 30 Years: Aging Populations

Aging Populations Continue to Burden World Economies

Report: Population Aging, Inequality to Hit Younger Generations Hardest


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