The echo of the coronavirus crisis is going to be felt for decades on world stock markets. And in the birth rates of the main economies. In the US alone, the latest estimates carried out by the Brookings Institution suggest that between 300,000 and 500,000 children will cease to be born in 2021.
The growing uncertainty raises too many unknowns and questions for potential parents, who decide to postpone the decision to have a child. For the moment.
You have to think in the long term. The collapse of the birth rate in 2020 and 2021 will begin to have its real impact on equities from 2035. In fact, its footprint from then until 2050 may even be positive for stock performance.
The explanation for this phenomenon is the demographic indicator that researchers use to relate the birth rate to the performance of equities in the long term. To do this, they use the MY Ratio, that is, the Middel-Young Ratio. This indicator correlates the number of middle-aged people (between 35 and 49 years old) with that of young people (between 20 and 34 years old).
AGAINST WINDS FOR STOCK EXCHANGES UNTIL 2035
According to this graphic published in MarketWatch, the MY Ratio and the stock returns are clearly interconnected. Looking ahead, the indicator suggests that the demographic winds will continue to blow against the stock market until 2035. The graph will have to be modified if the birth predictions come to pass and, especially, if its significant fall extends beyond 2021.
Mark Hulbert, a columnist for the US newspaper, reduces this whole theory to that the stock market will take decades to return to "normal" before the pandemic and the best we can do is "focus on how to take advantage of the 'new normal' in the that we live taking into account, among others, the aforementioned demographic indicator and its impact on stock markets ".
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