The Baby Bulge Begins by John Sweeney
Our Technical Editor opines about the demographic effect the baby boomer generation is having on the stock market.
Is 38% of the value in the market unaccountable? What could explain such a discrepancy? Goldman,
Sachs & Co. limited partner Barrie Wigmore (The Wall Street Journal , June 5, 1991) picked apart the
market's advances in the 1980s but found that interest rates, higher earnings and "overly optimistic
earnings estimates" couldn't account for more than 62% of the gains in that decade. Wigmore and
economic luminary Robert Shiller (of Yale University) both professed that they were puzzled:
"Something else was driving the market. It's something intangible."
Actually, it's the opening bars of the demographic effect. The baby boom is entering the investment age,
with all the qualities necessary to drive the markets higher: money, inexperience and hubris. The recently
heralded "return of the small investor"? It's chickens to the plucking. (This time, they rationalize, they're
going to be smart, use mutual funds and be protected by professional advice. Dream on.)