I found a nice chart about June last year which neatly compared net investment in the US (I think) vs baby boomer (age or something similar). Anyway it suggested very strongly that net investment very closely tracked baby boomer growth and aging.
It basically showed that (as you'd expect) the disinvestment and deleveraging as baby boomers retired had begun to flow through to a reduction in demand for housing and investment (eg. shares). This was apparent through house prices starting to fall (and the consequent "subprime crisis") early last year.
Anyway, from that point (approx 30 June 07), the sharemarket technicals were (to me) suggesting they were heading down, so I was pretty convinced that we had a deep and sustained fall coming in all investment markets, including shares and property. The only uncertainty was the impact of potential offsetting demand from the BRIC countries.
Anyway, I tried to google this chart but couldn't find it (though plenty of articles along these lines).
However, I did find at least this chart which shows just live births (in US, I assume this is similar in other Western nations) - top of page 55. Read the text too if you like. http://books.google.com.au/books?id=cgQQddebU_oC&pg=PA55&lpg=PA55&dq=chart+%22baby+boomers%22+%22savings%22&source=web&ots=mBncs6Kgw4&sig=Hno3ZJfmS8UciGkcUVVUM3kRBdM&hl=en&sa=X&oi=book_result&resnum=1&ct=result#PPA55,M1
Now from this I'm trying to draw some conclusions (I'm assuming BRIC has no impact - this could be wrong). I'm also aware this is not groundbreaking stuff - but I wanted to put my spin on the impact of it.
- In my opinion, the vast majority of investment growth is associated with population growth and demographics
- I'm going to assume most investment is between the ages of 40 and 55
- Births starting rising rapidly in 1935 then peaked in about 1955. So 1935+40=1975 so investment starts to ramp up from then until 1955+55=2010, which is when you'd expect it to begin declining as disinvestment would be much less than new investment. So we have our roughly 35 year bull market (in shares, property etc) we've likely just finished.
- So we'd then expect a gradual decline (in shares, property etc) for about 7-9 years until the 1977-1990 birth boom kicks in at 1977+40=2017. However in 2017 the baby boomers are still disinvesting until we get to the bottom of their trough in about 1972+55=2027. So between 2017 and 2027 we probably see a sideways move as the 1975-1990 boomers investment offsets the baby boomers disinvestment.
- Finally, the markets boom again from about 2027 until 1990+55=2045 before another decline.
So, assuming China/BRIC isn't able to take up the slack, I get (note there would be ups and downs along the way): - Bear market (shares, property etc) from 2008 until about 2017 (perhaps takes shares back to 1975-1980 lows, property perhaps 50% decline??) - Sideways move from 2017 until about 2027 - Bull market from 2027 to about 2045 - Bear market from 2045+
So roughly 20 year bear and bull markets I suppose. I can't recall how this fits in with others' expected market supercycles.
