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July 08, 2008

Changing Demographics and Wall Street

AdAge.com posted an article analyzing census data from the perspective of marketers. The data was interesting although I guess not all that surprising once it was laid out. I think that the implications go far behind marketing. Here are the key conclusions: (1) the US is aging with the average age for the head of a US household almost reaching 50. For marketers this means that buyers are getting more risk averse. I'd say the same thing is true for investors. (2) There is growing behavior difference between online and wireless people and those still using traditional communication methods. Again, I think this translates to Wall Street. Well connected investors using online research and trading tools strike me as making far different investments with different time horizons than those who still rely on traditional brokerage accounts. (3) The US is not one nation but a collection of regions – the Northeast is old, white, and has few households with children compared to the multi-ethnic, young, and still child bearing West, for example. I'm not sure how this impacts Wall Street directly but it clearly is important for individual companies trying to growth their revenues and profits in the domestic market. (4) The younger segments of our population are much more diverse. Among those under 45 20% are African-American, Hispanic, or Asian vs. just 10% of those over 65. I wonder if this younger cohort will have the same saving habits as the older cohort. Will the younger cohort follow the traditional life cycle of investing or does their different ethnicity and cultural background mean they will go about their investments differently even if their assets and incomes are similar to the today's 45 and older investors? (5) 40% of US population growth in the last seven years has come via immigration. This fact feeds into regional differences as well. Immigration obviously is a big issue for the economy if for no other reason than its impact on labor rates and labor availability....

....Another interesting aspect to immigration is one recently studied by my daughter. Today's immigrants are much less likely to follow the traditional route into major urban centers living solely with other immigrants form the same place and at the same income level. More and more immigrants are heading straights to suburbs or exburbs where even among their own immigrant populations there is great diversity in incomes and job levels. I'd wager a guess that immigrants are proportionately less likely to use traditional Wall Street products and services. If so, is that gong to continue or as they assimilate will hey be drawn to Wall Street? If they are not drawn to Wall Street, will money flows to the capital markets change even beyond the issues faced by the aging of the baby boomers and their likely shift toward more conservative asset allocations. Just some stuff to think about if you need to be distracted from the bear market and crazy intraday action like yesterday.

Posted by Steve Birenberg at July 8, 2008 11:59 AM in Stock Market