A second demographic cliff [the first such cliff is described below] is developing in spades, and globally, [and it is going to cause a] serious stock market crash in the year to follow. [Let me explain why that is the case.]
The article below by Harry Dent (economyandmarkets.com) is an edited ([ ]) and abridged (…) version to provide a fast & easy read.
About 30 years ago my Generational Spending Wave Demographic Indicator predicted that the U.S. would see a major generational spending peak in 2007…after which spending would slow, ultimately sending the economy over a “demographic cliff” (remember, 70% of the economy relies on consumer spending and when it slows, everything falls with it). This first demographic cliff happened right on cue, carrying the world into a financial crisis that we’ve still never really recovered from despite unprecedented government stimulus. [As mentioned in the introductory paragraph] now there is a second demographic cliff developing in spades, and globally, [and it is going to cause a] serious stock market crash in the year to follow.
While the peak number of baby boomers peaked in spending in 2007, the more affluent – the top 10% to 20% – didn’t peak until late last year, 2015…[primarily] because they tend to go to school longer and have kids later. They peak on about a 54-year lag, not 46 like the peak number of boomers. In other words, up until now their spending has still been driving the economy. Going forward, that will be less and less the case.
Don’t underestimate this group. We’re talking about the spending of the top 10% to 20% during a period of the highest income and wealth inequality since 1928 to 1929. They account for around 50% of income and spending that gives them much more weight and that means that as they cut back their spending as they’re already starting to, it’ll carve out a hole in the economy that will really kick off this global crash.
Look at the S&P Global Luxury Index – basically an index for affluent spending – which gives you an indication as to how this group is spending:
This index peaked in mid-2015 (in the same year the top 10-20% group peaked) and has fallen 26% as of February 11. It’s down much more than the broad S&P 500, down about 15% at worst recently from its high in May 2015….
The index includes iconic brands like Nike, Este Lauder, Mercedes, Moet Vuitton, BMW, Carnival Cruises and VF Corporation. [Revealingly,]… many [such] leading brands have also seen their stocks collapse in recent months or years:
- Nordstrom…down 36% since last March
- Ralph Lauren has crashed 46% since last January
- Sotheby’s is off 48% since June
- Tiffany & Co. is down 32% since August
- Williams-Sonoma is off 44%, also since August and
- Louis Vuitton, 24% since October…
Clearly, the affluent sector is falling! They have benefited the most from zero interest rate policies and this artificial bubble and “recovery,” but it’s now starting to break down. This is another monumental change in demographic trends and the final death knell for the economy…
The Fed thought it could fight the demographic decline and debt crisis since 2007 with endless QE and stimulus but there’s no way they can fight this trend….[Its] game over, and guess who will lose the most wealth in this next, larger crash? The very group I’m talking about. The top 0.1%, 1%, 10%, and 20%, because they own almost all of the financial assets that have been favored in this bubble period with endless QE and zero interest rates. Worse, it’ll be years before they see another great boom – not until late 2022-forward – and it won’t be like the one we saw from 1983 to 2000 [either].
Now is the time to protect your wealth on this final, desperate rally before stocks see a more serious crash in the year to follow.