Babies and banks


Wall Street is starting to worry about the birth dearth.

“It’s a slow death,” warned Joe Quinlan from his perch at Bank of America and Merrill Lynch’s chief investment office. Quinlan, the head of market strategy, put out a paper in June on The Global Baby Bust and Market Implications.

“The global baby drought was emerging even before the pandemic,” Quinlan wrote, “although the latter — by limiting social interaction and creating economic insecurity, and thereby dissuading couples from having babies — has only exacerbated the trend.”

Quinlan was spooked by multiple news stories showing record-low birth rates in the United States, China, and dozens of countries worldwide. Also, his global travels had an effect. “I was in Japan a couple of years ago,” Quinlan said on a phone call. “What really struck me is that there are villages where five elderly women are tending the garden. It looked like Chernobyl. The schools are closed. The playgrounds are overgrown.”

Why should investors care? “The growth rate of any economy is dependent on population growth,” he said. “The larger the population, the greater the labor force, the more capacity for consumption as workers per capita increases, and the deeper the base of taxpayers to support retirees.”

A society less interested in children is a society less interested in the future. Also, a society with fewer youngsters is a society with less innovation.

But don't worry. This all presents investment opportunities. “In a world rapidly aging and increasingly short of workers,” Quinlan wrote, “we believe portfolios should be tilted toward healthcare and technology/innovation leaders in robotics, automation, and artificial intelligence. In addition, the forces of demographic deflation favor companies that can grow their dividends and grow earnings at an above-average rate compared to the economy and their peer group.”

So, millennials maybe shouldn’t worry about starting families. Just save your money by living in a one-bedroom home, focusing entirely on work success, and then sock away those savings, investing in nursing home and robot stocks — since those will be your companions in the end, anyway.

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