Aging & Equities: Selling Stocks for the Long-Term

The negative impact of demographics on equities

September 2020. Reading Time: 10 Minutes. Author: Nicolas Rabener.


  • There is a negative relationship between aging populations and stock valuations
  • Given that most developed markets are aging, this creates structural headwinds for equities
  • The massive future population declines require investors to rethink traditional asset allocation


“The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.” – Friedrich von Hayek

“The use of mathematics has brought rigor to economics. Unfortunately, it has also brought mortis.” – attributed to Richard Heilbroner

In finance, everyone loves to make fun of economists. Even economists.

Perhaps the field is simply too complex for our simian brains to grasp: After all, the variables – GDP growth and interest rates, for example – are all interrelated, which makes it difficult to wrap our minds around them. At best, we create a mental map of positive and negative feedback loops. At worst, we develop something like a circular reference in Excel that may cause the spreadsheet to crash.

But sometimes economists do do obviously illogical and silly things. For example, Haruhiko Kuroda, the governor of the Bank of Japan (BOJ), has been buying up stocks, bonds, and exchange-traded funds (ETFs) to counter what is fundamentally a demographic problem. In his defense, he is not the first BOJ governor to pursue such a course, and he only has monetary power at his disposal. But that power might be put to better use attracting the millions of immigrants who are needed to help Japan avoid eventual demographic collapse.

The headwinds are fierce: Japan’s population is expected to decline by 40% between 2020 to 2100, falling from 126 million to 75 million, according to data from the United Nations. Losing 50 million people while stuffing money in the pockets of those remaining won’t stem the tide: It’s more like giving bailing buckets to the passengers on the Titanic.

Unfortunately, Japan is a harbinger of what’s to come across much of the world. And while fewer people may be good for the environment, it is terrible for civilization. Economic growth hinges on an expanding population. And the fabri