The Graying of America

By ACM Portfolio Manager, Randall Coleman, CFA

The demographic bombshells keep dropping.

The U.S. Census Bureau released in June its latest status report on the country’s population. While an aging population is a well-understood phenomenon, the eye-popping statistic is that the median age in the country has jumped to a record high 38.9 years. The country’s aging process is happening fast. In 1980, the median age was 30. Twenty years later it was 35. At this rate, in just a few years, the median age in the U.S. will top 40. Fewer workers supporting ever more retirees is a bad combination.

This month’s bombshells are centered in the world’s biggest populations. China reported that the country’s fertility rate had dropped to 1.09 in 2022, down from 1.30 in 2020 and startlingly below the 2.1 required to keep a country from shrinking. Accordingly, China also released data that its overall population had declined in 2022 for the first time since 1961. The final bombshell: India has surpassed China as the world’s most populous country.

We last wrote about demographics and investment implications in June 2019, but that was before Covid hit the accelerator. Covid accelerated the aging of the United States because immigration came to a screeching halt. Immigration has historically put downward pressure on the population’s aging process because most immigrants are much younger than the median. While immigration is recovering from the pandemic lows, it has still slowed significantly since 2016.[1] True, we are working through the aftereffects of the pandemic, but there is still a long way to go before we reach equilibrium. Who knows what the eventual in-person work scenario will look like? One obvious victim is office and commercial real estate, which continue to gyrate and will take years to even out.

The ramifications hit many sectors in the economy:

Despite alarming population trends, overall commerce forges on. “The loss of jobs to China ended around 2010, while the creation of new jobs linked to trade with China continues. U.S. exports to China amounted to $192 billion in goods and services and supported more than 1 million U.S. jobs in 2021.” India’s population continues to grow and is forecast to peak at 1.7 billion by 2063. India is the fastest growing “wearables” (smart watches and the like) market in the world. China’s decline will be offset by rapidly growing countries.

Additional growth industries in an aging society are in leisure activities (pickleball!), travel, and entertainment. How will our elders get to their events? An aging population will make growing use of mobility services, like Uber and Lyft. Fertility services is also a growing industry as women wait longer to have children. Opportunities arise in spite of, and often due to, demographic shifts.

Retirement is a relatively recent phenomenon. A hundred years ago, people worked until they weren’t able to work any more, then their families took care of them. Large families could do that. Smaller families today cannot bear the same burden. As the country and the world grapples with its demographic challenges, ACM’s portfolios are constructed to benefit from the graying environment.

The foregoing content reflects the opinions of Advisors Capital Management, LLC and is subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. Securities investing involves risk, including the potential for loss of principal. There is no assurance that any investment plan or strategy will be successful.