Bloomberg reports that aging baby boomers may hold down U.S. stock values for the next two decades as they sell their investments to finance retirement, according to researchers from the Federal Reserve Bank of San Francisco.
Americans born between 1946 and 1964 are beginning to retire as the U.S. stock market is still recovering from the financial crisis that began in 2007 with the collapse of the subprime-mortgage market. The timing is “disconcerting” and, since stock prices have been closely tied to demographic trends in the past half century, “portends poorly for equity values,” adviser Zheng Liu and researcher Mark Spiegel wrote in a paper released by the bank today.
The equity-price-to-earnings ratio of U.S. stocks tripled from 1981 to 2000 as baby boomers reached their peak working ages, and has declined since then, according to Spiegel and Liu. Overseas investors’ demand for U.S. stocks might help mitigate the effect of a baby-boomers’ sell-off, yet the impact would probably be limited, they said….
Read more at http://www.bloomberg.com/news/2011-08-22/baby-boomers-selling-shares-may-depress-stocks-for-decades-fed-paper-says.html
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