Neil Howe: Generational Changes Spell Trouble for Equities

Patrick Watson  |

At the Strategic Investment Conference 2018, John Mauldin interviewed Neil Howe, Fourth Turning best-selling author and demographics expert, about generational changes and their effect on the markets.

Howe said that demographics and generational factors have a huge impact on equity prices in the long run. Not only that, he thinks that there’s now a generational shift in wealth distribution that could spark major political and economic disruption.

Today’s Demographics Defies Conventional Wisdom

One of the examples Howe shared is that people in the 75+ age bracket still dominate stock ownership by far. This defies conventional wisdom that people reduce risk as they retire and leave the workforce.

Meanwhile, Millennials have lower income and stock ownership levels than previous generations did at the same age.

This is a key change as senior adults once had the highest poverty rates. Younger people are now challenging that once-safe assumption.

Howe also pointed out striking differences between early and late Baby Boomers. Those born in the mid/late 1940s inherited some of the Silent Generation’s wealth and good fortune. Late-stage Boomers born in the early 1960s score lower in all kinds of metrics.

Major Political and Financial Disruption Is Ahead

Neil Howe ended with an update on his Fourth Turning generational theory. He thinks we are about midway through it. From an economic standpoint, he foresees inflation fear and Fed tightening, which will be followed by a painful recession.

Politically, Millennials desperately want civic re-engagement. They are seeking to completely restructure institutions. The right wing is a brick wall on this subject and numbers have let them hold off the pressure so far. This will change as Millennials grow older and Boomers die.

Howe also pointed out that generational wealth transfer is going to be highly concentrated, reflecting current wealth inequality. Boomer wealth will flow to younger generations but the vast majority of Generation X and Millennials will get very little.

As that happens, Howe anticipates major disruption.

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