Baby Boomers driving demand for stocks

Readers of my blog know I generally feel that supply and demand is driving the stock market and not economic fundamentals. There are only a finite number of stocks available, so if more money gets invested, the market generally goes up. Money comes out, stocks go down. The one thing I didn’t consider is the impact of the baby boomer generation. A recent article pointed this out and I kick myself for not realizing this since I am a baby boomer myself!

The article’s author states:

“Over the past 25 years we have seen the single largest generation in our nation’s history, the baby boomers, push stock market valuations higher than they have ever been. It’s not magic; it’s simple supply and demand (mainly demand).”

The takeaway is that since subsequent generations will not be able to replace the investment dollars of the baby boomers, stock market valuations will fall, potentially severely. This seems inevitable, but at the same time, baby boomer stock investments won’t just disappear overnight. It will be a slow decline and won’t start for a while. If 1961 was the end of the top of the baby boomer generation, adding a retirement age of 65 gets us to 2026–still a ways to go yet.


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