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Viewing Market Opportunities through the Lens of Demographics
The Horizon is a quarterly report from our Chief Investment Office, exclusive to Merrill Private Wealth Management, intended to help high net-worth clients pursue their personal goals by addressing timely topics in areas such as macroeconomic trends, long-term investment themes, market dynamics, asset allocation and portfolio strategy as well as wealth structuring, planning and transfer.
“The rise and fall of generations has had outsized impact on equity markets historically, and it is our view that demographics will continue to impact global economies moving forward”
As recovery from the 2020 exogenous bear market continues, it is our view that global equities should continue to climb higher. We have long said that accommodative monetary policy, higher levels of economic growth and corporate cash flows, innovation and productivity, and manufacturing revival will be the pillars for long-term growth. However, in addition to these, demographic trends are likely to keep the secular bull running in the U.S. and abroad. The rise and fall of generations has had outsized impact on equity markets historically, and it is our view that demographics will continue to impact global economies moving forward.
“The maturing of the Millennial cohort into the middle-age category should keep the secular bull market in U.S. equities running over the next decade plus. In the long run, parts of the Emerging Markets universe such as consumer, healthcare and technology areas will likely benefit from the rise of the Gen. Z cohort, as they invest more of their rising incomes and boost future consumption trends.”
The Millennial cohort entering its peak years of consumption and investing should add to the U.S. equity uptrend by supporting growth, corporate earnings and valuations. We are already seeing evidence of risk-assuming behavior through the increased participation of retail investors in the equity market and a boom in the housing market. Looking further out, consumer-facing companies in emerging markets are likely to reap benefits from the rise of Gen-Z.
All data, projections and opinions are as of the date of this report and subject to change.
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The Chief Investment Office (CIO) provides thought leadership on wealth management, investment strategy and global markets; portfolio management solutions; due diligence; and solutions oversight and data analytics. CIO viewpoints are developed for Bank of America Private Bank, a division of Bank of America, N.A., (“Bank of America") and Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S" or “Merrill"), a registered broker-dealer, registered investment adviser and a wholly owned subsidiary of Bank of America Corporation.
All recommendations must be considered in the context of an individual investor’s goals, time horizon, liquidity needs and risk tolerance. Not all recommendations will be in the best interest of all investors.
Investments have varying degrees of risk. Some of the risks involved with equity securities include the possibility that the value of the stocks may fluctuate in response to events specific to the companies or markets, as well as economic, political or social events in the U.S. or abroad. Bonds are subject to interest rate, inflation and credit risks. Treasury bills are less volatile than longer-term fixed income securities and are guaranteed as to timely payment of principal and interest by the U.S. government. Investments in foreign securities (including ADRs) involve special risks, including foreign currency risk and the possibility of substantial volatility due to adverse political, economic or other developments. These risks are magnified for investments made in emerging markets. Investments in a certain industry or sector may pose additional risk due to lack of diversification and sector concentration.