The stock market just might go nuts though 2035!

[darkrose50]

The CCM market model video from 10-16-2019 made some interesting points (you can find it on YouTube searching for CCM investing).

I am going off memory, so the below specifics are likely not exact.

[1] Prime working age folks spend the most money.
[2] Baby-boomers were in this prime working age range from ~1985(?) until ~2000.
[3] The stock market went nuts when the baby-boomers were in this this prime working age band, and the stock market went up something nuts like ~825% over ~15-years.
[4] Millennials entered this range in ~2016 and will exit this range in ~2035.
[5] Millennials are more educated than the baby-boomers. Education equates to more money and more investing and should raise prices.
[6] Millennials outnumber the baby-boomers. Supply and demand should do its thing and raise prices.
[7] It is quite possible that the stock market could, in a similar fashion, go nuts for the next 15-years.

Basically (a) big waves of prime working aged folks, (b) spending the most amount of money that they will in there lifetime, (c) concentrated in a ~20-year-band, (d) where they are also the most populous segment in the population, (e) will likely effect the economy and effect the stock market, and (f) could make stock prices go much higher.

The stock market has been mostly sideways since ~2000. Historically it goes sideways, then shoots up, and then repeats. If history repeats itself, then we are, at some point, due and upward spike in the stock market.

Nothing is certain, but this looks like solid reasoning to me.

[Peelee]

So, there's an error introduced in literally the first point:

[1] Prime working age folks spend the most money.

People with more disposable income spend the most money. Someone with two minimum wage jobs is paying for rent, food, and not much else. A Venn diagram of "people with more disposable income" and "prime working age folks" will have overlap, sure, but they're picking the wrong circle.

[darkrose50]

So, there's an error introduced in literally the first point:

People with more disposable income spend the most money. Someone with two minimum wage jobs is paying for rent, food, and not much else. A Venn diagram of "people with more disposable income" and "prime working age folks" will have overlap, sure, but they're picking the wrong circle.

This is a look at the macro-trend. Not all baby-boomers worked, contributed to the economy, had money, and bought stock. Enough of them had money, bought stock, and drove up prices. Having a huge wave of prime-age working folks in the pipeline, that as an age band outnumbers each of the other age-bands, does stuff to the economy. One thing apparently that a wave like this does, historically, is to drive up stock prices.

This time around this wave is more educated, so perhaps we will get another, perhaps bigger, round of technological innovation . . . along with something like the dot-com bubble as well.

Then again perhaps another country will steal the technological innovator title from us, and totally crush us in the technological fields.

Also Disney is expanding, likely in part, to get ready for this wave of folks entering their prime earning years.

On the negative side we now have less money being contributed towards pensions, and pensions buy stock.

All the same I am betting that the stock market is going to go nuts. I am not relying on it going nuts, but I think that it will.

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https://www.marketingcharts.com/cust...-trends-107347

• The Silent generation (ages 76 years and older) spend $162.9 billion annually.
• Baby Boomers (ages 55-75 years old) spend a total of $548.1 billion annually;
• Gen X (ages 36-54 years old) follow Boomers with $357 billion annual spend;
• Millennials (25-35) are next with $322.5 billion in annual spend;

The Millennials outnumber the Baby Boomers by something like 20%, and are starting to enter the "prime spending" years. Millennials are apparently about to overtake every-dammed-body in spending, and are apparently going to crush it more than the Gen X's and more than the Baby Boomer's. A group of young working aged folks spending ~20% more than 548 billion annually based on numbers, combined with X% more based on prime working-age spending makes my eyes pop.

[halfeye]

This is a look at the macro-trend. Not all baby-boomers worked, contributed to the economy, had money, and bought stock. Enough of them had money, bought stock, and drove up prices. Having a huge wave of prime-age working folks in the pipeline, that as an age band outnumbers each of the other age-bands, does stuff to the economy. One thing apparently that a wave like this does, historically, is to drive up stock prices.

This time around this wave is more educated, so perhaps we will get another, perhaps bigger, round of technological innovation . . . along with something like the dot-com bubble as well.

Then again perhaps another country will steal the technological innovator title from us, and totally crush us in the technological fields.

Also Disney is expanding, likely in part, to get ready for this wave of folks in their earning prime.

On the negative side we now have less money being contributed towards pensions, and pensions buy stock.

All the same I am betting that the stock market is going to go nuts. I am not relying on it going nuts, but I think that it will.

The stock market can go nuts up, and it can go nuts down, it probably will go nuts, but up or down is a guess, probably one after the other, but which first is another maybe.

[Peelee]

They also had less income disparity and more buying power, and innumerable other differences.

[darkrose50]

Historically we get new highs. The stock market generation after generation hits new highs. People always say that it can go down, but it never does for longer than 20-years, and then it starts breaking recodes again.

Population and inflation play their parts. New things are created, are given value, create trade, and grow the economy. A great deal of it is all in our mind, and a great deal of it is wired into how humans work. Shipping, trains, airplanes, interstate highways, the internet . . . they all created net-value and net-trade that was not there before.

This is just how it has always worked, bar a societies collapse. There will always be new-all-time highs over the long term as we invent things, create value, create trade, increase in population, and have inflation.

Something can change, our society can collapse, but this is unlikely to occur in the short-term.

Perhaps global-warming will just wipe out civilization as we know it. If it does, then it will likely not matter much if you contributed another 10% of your income to your 401k, or not.

They also had less income disparity and more buying power, and innumerable other differences.

I am hopeful that the Millennial generation will be more exposed to a wider range of people, and will act accordingly.

It was good for the generations after the great depression to fix some inequality (then it fell out of favor).

Perhaps it will be good for the generations after the great recession to fix some inequality (perhaps it will fall back into favor).

[Imbalance]

• The Silent generation (ages 76 years and older)
• Baby Boomers (ages 55-75 years old)
• Gen X (ages 36-54 years old)
• Millennials (25-35)

Oh, good - I'm 'Gen x' again. Not trying to derail, I just find it interesting that every time an article tries to define the generations and blame something on one or the other, I get lumped in with a different age range. It seems the folks who write about these things for a living have a hard time with concensus. I've been everything from a millenial to a boomer, but my birthday never changed. And what ever happened to 'Generation Y'?

Also:
https://youtu.be/Ca4xBrmWUJc

Sorry, back to the money thing. So, you're saying I may be able to afford to retire some day, after all?

[darkrose50]

Oh the generation labels are made-up.

When we have a big population wave of folks, in age-bands, where the largest population numbers are in the age-bands that are in the prime-spending years of their lives, then the economy roars. We just might be in the start of this roaring economy. I bet that other things can screw it up, but this is how it apparently works, and is likely a major contributing factor.

I would LOVE to see my $1.00 become ~$8.25 over the next 15-years . . . that would be NUTS! But apparently that is what happened when the Baby-boomers hit this sweet-spot from ~1985 to ~2000! Or whatnot, I will need to take notes when not at work.

Holy-cow that would be a pie-in-the-sky dream! My wife is retiring in 2035, so . . . yeah . . . this would be perfect timing for my family.

[Brother Oni]

Oh, good - I'm 'Gen x' again. Not trying to derail, I just find it interesting that every time an article tries to define the generations and blame something on one or the other, I get lumped in with a different age range. It seems the folks who write about these things for a living have a hard time with concensus. I've been everything from a millenial to a boomer, but my birthday never changed. And what ever happened to 'Generation Y'?

The best description I've heard of Gen X is that they're getting squeezed at both ends, both paying for the healthcare for their retired Baby Boomer parents and supporting their university age Millenials and all we want to do is curl up on the sofa with a big glass of red wine and good wifi.

I believe Generation Y got renamed to Millenials as it was catchier.

I would LOVE to see my $1.00 become ~$8.25 over the next 15-years . . . that would be NUTS! But that is what happened when the Baby-boomers hit this sweet-spot from ~1985 to ~2000! Or whatnot, I will need to take notes when not at work.

Yeah, it's called hyperinflation, and is usually associated with a massive crash in buying power.

[2D8HP]

...that is what happened when the Baby-boomers hit this sweet-spot from ~1985 to ~2000! Or whatnot, I will need to take notes when not at work.

Holy-cow that would be a pie-in-the-sky dream! My wife is retiring in 2035, so . . . yeah . . . this would be perfect timing for my family.

Crash in '87 and in '00 (and '02 and '08).

Timing is everything!

[darkrose50]

Crash in '87 and in '00 (and '02 and '08).

Timing is everything!

I have been mostly lucky with timing when I switch from one sector to another based on what the politicians in power are talking about. I don't try to time the market by selling into cash.

Right now I am ~100% stocks (via mutual funds). I am thinking about going 30% stocks and 70% bonds by 2035. Evidently that is some simplified risk/reward ratio that results in earnings and stability that you use to maintain your wealth.

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Stocks/Bonds average 1926-2016

Income Based Portfolios
0/100 05.4% average, worst year N/A?
20/80 06.6% average, worst year -10.1%
30/70 07.2% average, worst year -14.2%

Balanced Portfolios
40/60 07.8% average, worst year -18.4%
50/50 08.3% average, worst year -22.3%
60/40 08.7% average, worst year -26.6%

Growth Portfolios
70/30 09.1% average, worst year -30.1%
80/20 09.5% average, worst year -40.0%
100/0 10.2% average, worst year -40.1%

https://www.financialsamurai.com/his...io-weightings/

[El'the Ellie]

I would LOVE to see my $1.00 become ~$8.25 over the next 15-years . . . that would be NUTS! But apparently that is what happened when the Baby-boomers hit this sweet-spot from ~1985 to ~2000! Or whatnot, I will need to take notes when not at work.

That would be awesome. I, too, would love to see my investments shoot up.

However, I tend to agree with Peelee about point [1].

People will spend money when they have money to spare.
You tend to have the most spare money when you are making the most money.
People tend to make the most money around their prime working age.

I think those three points are fairly uncontroversial. However, there's the implication in your first point that when a person arrives at their prime working age, they will have spare money. (I realize you're talking about global averages. I'm also talking about the 'average person'. Certainly there are exceptions in either case.)

That expectation (having spare money to spend) was true for earlier generations. However, it's now debated how affluent the working class will be.

Consider the following example:


As we can see (and data from many studies back this up) the amount people are being paid has generally stopped rising, whereas the amount of production a person produces continues to rise. The implied outcome here is that profit margins and company stocks are going up, but the wealth that middle class people actually have to spend is not increasing. (And because of inflation, could actually be decreasing, relatively speaking)

This could compound with something your point [5] touches on. I believe you're right saying that Millennials are, on average, more educated than older generations. They (ok, fine, we) got this way by spending a lot on college/universities, and going into extreme debt to do so. People can debate how they think that debt should be handled, but regardless many millennials are swiftly approaching their prime working age with hundreds of thousands of dollars in debt. This means people of that generation won't be in a position to spend like earlier generations. (A monthly $1500 loan payment is like a second rent payment.)

People are (correctly, IMO) worried about this actually causing a economic collapse, especially in housing. Many older generations are looking to sell their nice houses to downsize. Much of their retirement money might have been accounted for in a $600,000 house. Theoretically, someone will buy it for about that price. But there are comparatively fewer millennials looking to buy any house, let alone one that expensive. So the seller does the only thing they can do, and drops the price until they can find a buyer. The more extreme the lack of house-buying funds for millennials, the more extreme the drop in house prices. This leads to a global trend of falling house values.

Anyway, I am not an economist. I just read the news and whatnot, but from where I'm standing this seems like the most plausible outcome of a number of factors in play.

[Manga Shoggoth]

The best description I've heard of Gen X is that they're getting squeezed at both ends, both paying for the healthcare for their retired Baby Boomer parents and supporting their university age Millenials and all we want to do is curl up on the sofa with a big glass of red wine and good wifi.

Yup - welcome to my life. Depending on where the line is drawn I'm either GenX or Baby Boomer, and as a result get blamed for it as well as having to pay for it.

[darkrose50]

It would seem that what the "real" inflation is can be hinted at by the cost of services that cannot be outsourced. The cost of education is what was pointed out in a story on NPR. You cannot really outsource a college education.

[Peelee]

It would seem that what the "real" inflation is can be hinted at by the cost of services that cannot be outsourced. The cost of education is what was pointed out in a story on NPR. You cannot really outsource a college education.

Sure you can, you just don't get the fancy slip of paper.

[Willie the Duck]

[1] Prime working age folks spend the most money.
[2] Baby-boomers were in this prime working age range from ~1985(?) until ~2000.
[3] The stock market went nuts when the baby-boomers were in this this prime working age band, and the stock market went up something nuts like ~825% over ~15-years.
[4] Millennials entered this range in ~2016 and will exit this range in ~2035.
[5] Millennials are more educated than the baby-boomers. Education equates to more money and more investing and should raise prices.
[6] Millennials outnumber the baby-boomers. Supply and demand should do its thing and raise prices.
[7] It is quite possible that the stock market could, in a similar fashion, go nuts for the next 15-years.
...
Nothing is certain, but this looks like solid reasoning to me.

The entire initial premises here makes the assumption that these factors are the primary market drivers. This means that all downstream projections based on these premises are subject to the situation that they may not be. I get the premise of 'when the Baby-boomers hit prime working age, this good thing happened, and the Millennials are primed to hit the same life-phase, and they're even more populous and educated than the Baby-Boom!,' but it's simply not the whole picture. Baby Boomers (a distinctly US term, so I assume we're talking about that workforce) entered the workforce at a unique time in world history -- one where the Us job market was specifically primed to absorb as many willing laborers of nearly every skill level and still succeed. This was because they came into the market that their parents prepared for them by coming home from WWII into the only developed, first-world economy not to have been significantly disrupted (and in fact enlarged, emboldened, and modernized) by the war. This was an unprecedented advantage that allowed things like highest in the world salaried manufacturing jobs to exist in the US and still by viable, simply because of the inherent advantages of them being in the US was, well, at the time an advantage. That's a condition/advantage that other nations did a half-century headlong rush to erase, one that will not exist for Millennials (to say nothing about other economic motivators like a flourishing middle class and the like).

Simply put, Millennials are not in the same position that Boomers were 35 years ago. Perhaps the same level of economic prosperity will occur, who knows (maybe there is some inherent American Exceptionalism, or maybe technology will advance so quickly that all nations will prosper, etc.), but it will not happen for the same reasons.

[Tvtyrant]

There are certainly economic advantages to not having a reverse pyramid over your head. Not having to pay for retirees and children at the same time is generally good, Japan has been seeing the long term effects of a too-large retired population on a small working population.

The retirement of older individuals will also open up jobs for younger people, so while wages won't rise cumulatively they will rise for middle age individuals, along with the acquisition of their parents and grandparents property. House ownership historically started in the late 30s, which was changed by a combination of factors from the late 40s through the late 70s. We are seeing a restoration of older economic cycles (living with parents until later, later wage rise and household ownership) but the current generation moving into middle age should do okay in about 10 years.

[Crow]

The stock (and housing) market is going to eat **** in a big way. It all goes in cycles.

[darkrose50]

Having a young, working population, outnumbering other age-groups, in their high-spending years is a major contributing factor to be sure, but it is not the only contributing factor. I would not count on an ~825% return in the S&P 500 over the next 15-years. Invest sensibly, and for the long-term. I would recommend sensibly preparing for the possibility of the stock-market shooting up (as it has historically done).

Disney World, for example, will likely be packed to the gills with a wave of young families.