Stock markets used to be places where businesses went to raise money – to launch or to expand. But not today. They have, instead, often become a fast-moving casino.
First, they allowed high-frequency traders to make vast – and almost guaranteed – profits from other people’s trades.
Then they created one-day options trading, aimed at those who love sports betting. These now represent 50% of all options trading, according to the Wall Street Journal.
And with central banks adding $72tn of stimulus since 2009, players have had plenty of cash with which to place their bets.
So many markets have lost touch with the real world which actually drives company performance and the economy.
This matters, as the World Population Review chart shows that global populations are ageing fast due to a combination of increased life expectancy and falling fertility rates.
MAJOR CHANGE IS UNDERWAY IN THE GLOBAL ECONOMY
As the detailed charts on fertility rates and life expectancy in the G20 since 1950 show:
- Fertility rates are now below the replacement level of 2.1 babies per woman in all G20 countries
- They have collapsed since 1950 – quite dramatically in the Emerging Economies
- Life expectancy has risen over the same period – again, quite dramatically in Emerging Economies
Taking a broad look, the G20 group of countries are 79% of global GDP. And as the chart shows, they fall into three groups in terms of GDP per capita and median age:
- Rich but old: These are wealthy western countries with GDP per capita around $50k and median age in the early 40s
- Poor and young: These are emerging economies with GDP per capita around one-third of the ‘rich’ group and median age around 30
- Poor and ageing: This group contains just China and Russia. It has similar GDP per capita to the ‘poor’ group, but median age is in the late 30s
As we noted a decade ago in the Financial Times:
“Demographics are now taking demand patterns in completely new directions.”
“Sustaining future growth depends on the G20’s ability to successfully develop and implement new policies. These need to focus on the opportunities offered by the emergence of the Perennials 55+ cohort as major new demand sources for the first time in history.”
Unfortunately, policymakers preferred to believe they could somehow “print babies” via $72tn of stimulus.
But as the chart shows, the Perennials 55+ cohort are now the only source of population growth in the wealthy ‘most developed’ economies:
- The under 25 cohort is actually smaller than in 1950
- The ‘wealth creators’ 25-54, who drive consumption and GDP growth, are now declining in numbers
- Increasing Life Expectancy means the Perennials will soon almost rival them in numbers
And as US spending patterns confirm, the Perennials 55+ are essentially a replacement economy. They already own most of what they need, and their incomes decline as they retire.
This is probably good news from a climate change perspective, as their demand reduces. But it makes GDP growth very difficult to achieve in the absence of major changes in corporate and financial market focus.