Update on Demographics and the Stock Market

“Return-based Analysis of Demographics as Stock Market Predictor”, building on formal research summarized in “Demographic Headwind for U.S. Stock Market?” and “Classic Research: Demography and the Stock Market”, looks at interactions between U.S. age demographics and U.S. stock market behavior. What does adding a decade of data say? To investigate we look at interactions between:

• Shiller’s S&P Composite Index with reinvested dividends and adjustment for inflation based on the U.S. consumer price index (real total returns).
• Percentages of total U.S. population for seven age cohorts as constructed from the U.S. Census Bureau American Community Survey: <24, 25-34, 35-44, 45-54, 55-64, 65-74 and >75.

We look at cohorts individually and at the ratio of the middle four cohorts (25-34, 35-44, 45-54, 55-64) to the youngest plus two oldest cohorts (<24, 65-74, >75), termed the productive ratio. We test how these metrics relate to stock index real total returns over the next 20 years. Using the specified annual data, measured in July, for 1900 through 2020, we find that: (more…)