Thoughts On 'Mind The (Expectations) Gap: Demographic Trends And GDP'
Charles Sizemore | Aug 11, 2013 02:51AM ET
There, I got your attention.
I find that when I start an article with the word “demographics,” eyes glaze over. But when I start the same article with “sex,” the reader snaps to attention. Funny how that works.
Yet in the context of the economy and the financial markets, they are the same thing. Consumer spending is roughly 70% of the economy according to the official GDP numbers. But the reality is that it is responsible for 100% of our economic activity. Adam Smith commented in here ).
What are we to do with this information? In truth, there is no much you can “do” about demographics. They are the future that has already been written. But you can invest accordingly. Understand that top-line sales growth will probably not be as robust as in years past. Earnings per share growth will come disproportionately from share buybacks—as has been the case for the past several years.
Importantly, you should also invest for income. Focus on companies with stable businesses that have a long history of raising their dividends. And, where possible, look for growth in companies that target emerging market consumers and young American families. The Millennials are starting to enter the family formation stage, and this generation will be the primary engine of domestic growth for the next 30 years.
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