Episode Overview

Podcast: Money For the Rest of Us
Host: J. David Stein
Episode: #546 – “Do Retiring Baby Boomers Actually Move Markets? And How Much Do Demographics Really Matter?”
Release Date: December 10, 2025

This episode explores the widely discussed theory that retiring Baby Boomers, as they shift their investment allocations with age, have a significant power to move financial markets. Host J. David Stein revisits both anecdotal perspectives and historical data to unpack the influence of demographics—including population aging—on market trends, and challenges straightforward demographic-driven investment predictions. The episode also addresses concerns raised by strategist Peter Zeihan and the claims of well-known demographics-focused forecaster Harry Dent Jr.

Key Discussion Points and Insights

1. Peter Zeihan’s Claims on Baby Boomer Capital Flows

• Zeihan’s Theory: Most private capital comes from people in their 50s and early 60s (primarily Baby Boomers), who after raising their children, save aggressively for retirement. He claims 70% of total private capital comes from this group and suggests that with 80% of Boomers now retired and becoming more conservative, a mass movement from stocks to bonds could move markets.

  • [00:40] “He contends that most private capital…comes from people in their 50s and early 60s…now that 80% of America’s baby boomers are retired, they will become more conservative in their investing and move much of those savings from stocks to bonds…and that could potentially move markets.” – J. David Stein

• Stein’s Skepticism: Stein challenges the 70% figure as “seems high to me,” and later disputes core assumptions about retiree portfolio shifts and their market-moving impact.

2. Demographics as a Tool for Market Prediction

• Historical Background:

  • Stein recalls the late 90s when Harry Dent Jr., a prominent demographic forecaster, promoted using demographic cycles (46-year birth indexes) to predict asset price booms and busts, including U.S. stock returns.

  • Dent's notable book, The Great Boom Ahead (1993), correctly forecasted the 1990s stock boom; however, later predictions—such as the Dow reaching 35,000 by 2008—missed the mark by wide margins.

  • [02:50] “My takeaway is it’s really difficult to make investment predictions using demographic trends.” – J. David Stein

• Where Dent Was Right and Wrong:

  • Dent predicted economic growth would slow post-2007 as Baby Boom spending peaked; this held true, but he forecasted associated investment busts or crashes that did not materialize.
  • [05:40] “The economy from year end 2012 through 2023…it had slower economic growth: 2.5%. That was true. But…we can look at the demographics, see the trends, but we’re not sure how that will translate into the investment markets.”

• Market Reality vs. Demographic Models:

  • U.S. equities from 2012–2023 returned an annualized 13.1%, defying demographic predictions of a crash; valuation expansion played a major role, and factors like buybacks and investor preferences cannot be anticipated merely from demographic shifts.
  • [06:35] “Actual return was 13% because the price-to-earnings ratio…went from 14.6 at the end of 2012 to close to 25 by the end of 2023. That added 5 percentage points to return. That's hard to predict.”

3. Why Demographics Alone Don’t Move Markets

• Multifactor Reality:

  • Demographics (like working age population) are only one ingredient of economic and market outcomes—innovation and productivity are equally, if not more, important.

  • [10:28] “The other thing that drives economic growth is innovation, it’s productivity...And so it can't just be the number of people, it’s what are they doing, how productive are they?”

• Zeihan’s “80% Retired” Claim Challenged:

  • Stein disputes Zeihan’s assertion that 80% of Baby Boomers are retired (and have already gotten more conservative) as misleading, citing ongoing market vibrancy and continued tight bond spreads. He highlights that the sheer scale of financial markets dwarfs any gradual shift by one generation.

  • [12:18] “He’s overlooking the fact that banks can create money out of thin air as part of lending. The world is not capital starved...It isn’t just what baby boomers decide how to allocate their retirement balances because the size of that just isn’t that large.”

• Role of Bank Lending and Foreign Capital:

  • Money supply and capital pools are also shaped by bank lending (which literally “creates” money by credit creation), central bank policy, and inflows from foreign investors—particularly in the 2010s and 2020s, much demand for U.S. equities has come from non-U.S. sources.

  • [13:10] “Much of the stock market boom from 2012 through 2024 was non US investors investing in US stocks helping to push up valuations.”

4. Natural Rate of Interest and AI Boom

• Discussion of the “natural rate of interest” (r-star), and how it changes with supply of capital/demand for ideas.

• Even as demographics slow, fresh sources of demand for capital – such as the $5 trillion projected for global AI infrastructure by 2030 (J.P. Morgan research) – can keep interest rates high and drive market trends.

  • [14:58] “So real rates are higher despite slowing birth rates around the world. So it isn’t just the birth rate. It’s: are there ideas that need to be funded and how willing are investors to fund that? And that’s the thing that’s driving markets right now, not demographics.”

  • [16:12] “JP Morgan…estimate global AI infrastructure spending will reach $5 trillion in 2030. And it’s so huge…If it’s a 10% rate of return, these companies would need to generate an additional $650 billion a year in revenue indefinitely. That’s equivalent…of every iPhone user paying an extra $35 per month for AI services...But most people aren’t.”

5. Quantifying Boomer Impact on Markets & Asset Reallocation

• Federal Reserve Data:

  • Baby Boomers control about half of U.S. private sector household net worth (approx. $85 trillion): $27T in stocks/funds (could include bonds), $18T in real estate, $8T in private businesses.

• Market Scale vs. Boomer Flows:

  • Even if Boomers shifted 1–2% of their stock holdings per year (i.e., $270–540B), that is minimal compared to U.S. daily trading volumes ($400–600B/day) and annual turnover (hundreds of trillions). Similarly, $250–500B moving into bonds annually is a drop in the bucket for the $50T+ bond market (with trillions in new supply from Treasury and others).

  • [19:42] “If baby boomers move...1% to 2% a year. That’s $270B to $540B of movements from stock to bonds. The average daily U.S. trading volume is $400–$600 billion per day, hundreds of trillion dollars a year. This potential movement…is very small in the scheme of things.”

6. Broader Lessons on Forecasting and Diversification

• Narrative Appeal vs. Investment Reality:

  • Demographic investment narratives are compelling and easy to chart, but don’t capture the interplay of other macroeconomic drivers. They make for good graphs and copy but poor predictive tools.
  • [21:28] "There is something intuitive or narratively appealing about using demographics to make investment predictions...Makes for great graphs, great copy. But...I've not seen it work.”

• Diversification and Exposure:

  • Stein shares that he holds a position in India for demographic reasons, but emphasizes he doesn’t base his whole portfolio—or return expectations—on demographic projections alone.
  • [22:23] “Would I make a prediction of that [India’s stock market]…? No. But it’s a demographic position I’ve taken and I’ve made…3% of my net worth invested there. But that’s why we have asset gardens. We’re diversified among many different type of assets.”

• Process and Humility in Investing:

  • He advocates focusing on current data (valuations, earnings growth forecasts, interest rates, yield spreads) and recognizing that future outcomes inevitably hold surprises. Regular reassessment is key.
  • [24:37] “We can see where we are now in terms of valuations, interest rates and what’s going on now. And that’s why I call it investing on the leading edge of the present. That’s guided my approach to investing for several decades now.”

Notable Quotes & Memorable Moments

• On Demographic Theories:
  • [02:50] “My takeaway is it’s really difficult to make investment predictions using demographic trends.” – J. David Stein
• On the Failure of Demographic Crash Forecasts:
  • [06:13] “We can look at the demographics, see the trends, but we’re not sure how that will translate into the investment markets.”
• On Bank Lending Magic:
  • [12:49] "Banks can create money out of thin air as part of lending. The world is not capital starved."
• On Real-World Portfolio Choices:
  • [19:42] “This potential movement from baby boomers is from stocks to bonds. It’s very small in the scheme of things.”
• On Humility and Current Data:
  • [24:37] “There are surprises that occur. But we can see where we are now in terms of valuations, interest rates, and what’s going on now. And that’s why I call it investing on the leading edge of the present.”

Timestamps for Key Segments

• Zeihan’s Claims & Introduction: 00:40 – 03:00
• Dent and the Difficulty of Demographic Forecasting: 03:00 – 08:00
• Market Outcomes vs. Demographic Pessimism: 08:00 – 10:00
• What Really Drives Growth and Returns: 10:00 – 13:30
• Are Boomers Moving the Markets?: 13:30 – 20:00
• Diversification, India Example, and Realistic Forecasting: 21:00 – 24:00
• Conclusion—Focus on Present Data and Humility: 24:00 – End

Conclusion

J. David Stein’s central message: demographic trends matter, but are far from determinative. Market outcomes hinge on a web of drivers—innovation, global flows, valuations, and unpredictable shocks. The allure of demographic narratives remains, but investment process should rest on current evidence, humility, and flexibility. For listeners and investors, Stein advocates awareness—not dependence—on demographic trends, diversifying portfolios, and ignoring the hype around so-called “inevitable” market outcomes tied to generational shifts.