How demographics affects stock valuations

New research suggests that stock and bond valuations are driven by the age of the population – at least in the US.

Most investors don’t start this young © Alamy
(Image credit: Credit: David Burton / Alamy Stock Photo)

For most of us, how we invest is linked to our age. People will tend to save little when young (they may often be net borrowers instead), will put aside more as they approach middle age and will draw down their investments to fund their expenses after they retire. And if each of us does this individually, you might expect our combined decisions to have some influence on markets.

A population full of middle-aged savers might push up the price of stocks, bonds and other assets because there will be more demand (savings) chasing a limited amount of supply (the number of shares and bonds available to buy). When the proportion of savers is lower, the demand will drop (because the young are not yet saving) and supply could even increase (because older investors are now selling assets).

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free
https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up
Explore More
Cris Sholto Heaton

Cris Sholto Heaton is an investment analyst and writer who has been contributing to MoneyWeek since 2006 and was managing editor of the magazine between 2016 and 2018. He is especially interested in international investing, believing many investors still focus too much on their home markets and that it pays to take advantage of all the opportunities the world offers. He often writes about Asian equities, international income and global asset allocation.

Cris began his career in financial services consultancy at PwC and Lane Clark & Peacock, before an abrupt change of direction into oil, gas and energy at Petroleum Economist and Platts and subsequently into investment research and writing. In addition to his articles for MoneyWeek, he also works with a number of asset managers, consultancies and financial information providers.

He holds the Chartered Financial Analyst designation and the Investment Management Certificate, as well as degrees in finance and mathematics. He has also studied acting, film-making and photography, and strongly suspects that an awareness of what makes a compelling story is just as important for understanding markets as any amount of qualifications.