Should we get ready for a post-pandemic baby boom?

Birth rates across the developed world collapsed as people locked themselves away. Hopefully that won't last, says Merryn Somerset Webb. There's nothing like the end of a crisis to make people feel like making babies.

There once was an idea floating around that markets move with the moon. It sounds silly, but does stand up to some scrutiny. Research suggests the moon affects how we feel – more negative around a full moon; more positive around a new. We know that psychology plays a major part in market moves, so it makes sense that the two might be connected. Indeed, several studies show that markets do better around a new moon than a full – to the tune of 3%-5%. Fascinating, isn’t it? And once you know about it, it can seem to explain everything. Forget money flows and valuations – it’s all about the moon. 

The problem, of course, is that lunar cycles aren’t the only thing that – once you vanish down their rabbit hole – seem to explain everything. Demographics is the same. Once you’ve looked at how the numbers of people knocking about affect everything from GDP (more people = more growth!) to valuations (more people investing = higher markets), you wonder why you bother with anything else. This is why the drop in developed world birth rates in 2020 is causing such upset.

Fertility rates have been falling anyway (the worldwide rate is down 50% in 50 years, from 5.1 babies per woman to 2.4). But everywhere from France to Florida, births in December and January were down 7%-20%. Places with the most extreme lockdowns saw the fewest births (eg, Italy). Perhaps March and April data will suggest things got a bit steamier over the summer. Perhaps not.

We were never convinced that combining a virus spread by close indoor contact with a government policy that effectively locked those of childbearing age inside with their existing children for months on end would feel very, well, sexy – and there is often a baby bust after a nasty crisis (think the 1930s and post-oil crisis in 1973). This matters. Having more old people than young puts stress on pension and healthcare systems and could hit markets (as oldies remove cash and fewer young are putting it in). We may also see inflation as workers’ bargaining power finally rises . 

But a few things to note. First the bust might be temporary. Births are still a function of weddings (in 2019, two-thirds of babies in Italy and half in the UK were born in wedlock). There have been very few weddings in the last year. There will be an awful lot in the next year. More weddings. More babies – hopefully mostly conceived during a newly legal holiday in the sun. Note, too, there is nothing like the end of a crisis (hello vaccine...) to make people feel like making babies. The UK’s greatest baby boom ever was that of 1920, the year after the Spanish flu epidemic (even more lethal than the war had been). In all, 1.1 million babies were born – more than in 1947 (which fired the starting gun for the boomer generation) or any year since, despite the huge rise in the number of women. It must have been a hell of a year to be a pram salesman. 

Second, even if the boom doesn’t last (it didn’t in the 1920s) and fertility rates continue to fall, it isn’t necessarily bad. If the pandemic does what many think it will have done – accelerated trends that could turbo-charge productivity – we might soon find that exploiting cheap labour isn’t the only way to grow GDP. Which would be nice. While we wait to see, those who want to be financially ready for the potential arrival of new family members and plan to invest accordingly might want to wait a few weeks: the next full moon is on 28 March.

Recommended

The best 0% balance-transfer credit cards
Credit cards

The best 0% balance-transfer credit cards

These 0% balance transfer credit cards offer some of the best deals on the market today.
9 Jun 2023
Best savings accounts – June 2023
Savings

Best savings accounts – June 2023

Interest rates have been creeping up - we look at the best savings accounts on the market right now.
9 Jun 2023
Share tips of the week – 9 June
Investments

Share tips of the week – 9 June

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
9 Jun 2023
The best one-year fixed savings accounts - June 2023
Savings

The best one-year fixed savings accounts - June 2023

You can now earn over 5% on 1 year fixed savings accounts - the best rate seen in 14 years. We have all the best deals available now.
9 Jun 2023

Most Popular

Best debit and credit cards to use while travelling abroad
Personal finance

Best debit and credit cards to use while travelling abroad

If you’re going on holiday or travel abroad regularly, it’s worth knowing what the best card is to avoid hefty fees. We weigh up the charges and any p…
6 Jun 2023
Nationwide to give £100 cash boost to customers
Personal finance

Nationwide to give £100 cash boost to customers

Nationwide Building Society is giving customers £100 as it reinvests profits. Dubbed the Nationwide Fairer Share scheme, we look at who is eligible.
22 May 2023
A discounted REIT to buy now
Investments

A discounted REIT to buy now

This real estate investment trust is carving out a niche for itself by recycling old offices. Investors should take advantage of the discount and buy …
6 Jun 2023