This document summarizes a presentation on how demographics influence economics and markets. It discusses how increasing longevity is challenging existing frameworks for individuals, governments, and financial institutions. Several key points are made: longevity is growing fastest for those over 80; radical policy changes may be needed; public debt strains stem from demographics; stock market PE ratios correlate with working age populations; and understanding macro-demographic trends is critical for retirement planning and asset allocation. Demographics affects macro fundamentals like growth, inflation, and debt sustainability.
2. Amlan Roy PhD
Founder, Global Macro Demographics
Research Associate, Systemic Risk Centre, LSE
Honorary Fellow, Institute & Faculty of Actuaries
www.globalmacrodemographics.com (Amlan Roy)
Demographics Unravelled
How Demographics Influence
Economics & Markets
Society for Professional Economists
London (17 October 2022)
3. Demographics Unravelled (Wiley, Jan 2022)
• Interface of Economics, Finance & Actuarial
Science
• Challenges convention by appealing to data,
intuition and application
• Praised by Nobel laureate, Fed President,
Investors, policy makers, pensions experts
• Mentioned by the FT’s Martin Wolf as one of
the best new books
• Addressed to investors, policy-makers and
academics
9. GDP Growth: Demographic Decomposition
Source: GGDC, UN
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10. Demographics Has Driven Inflation Historically
Jim Reid and Team (DB)
• No country saw average annual
inflation below 2% since 1971 when
we moved to a global fiat currency
system (87 in our sample).
• Only 28 averaged less than 5%. No
country has seen annual average
inflation below 2% since 1900 (25 in
our sample) and only 4 between 2%–
3%.
• 20th century: They conclude that a
confluence of forces but ultimately
underpinned by a unique explosion in
the size of the global population,
especially in the second half of the
century
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11. Public Debt Strains Emanate from Demographics
Source: European Commission
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12. US: S&P 500 P/E Ratio & Middle/Old Ratio
Source: CS Demographics Research
www.globalmacrodemographics.com (Amlan Roy) 12
13. Equity Premia, House Prices & Bond Yields
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15. What affects Housing Demand & Supply ?
• Population Growth
• Labour Market
• Wages & Income, Wealth
• Household Structure
• Rural and Urban
• Credit Provision
• Stage of life-life cycle and career
Demand
• State of the Economy
• Business Credit
• Land
• Complementary Infrastructure
• Labour & Materials supply
• Technology
Supply
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16. Which Sectors to Invest In?
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18. Gender Equality: A Quadruple Dividend
Source: UN, IMF, SSGA
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Conclusions
• Demographics affects macro fundamentals such as growth, inflation, debt
sustainability and current account
• Understanding of macro-demographic fundamentals is critical. Changing behaviour
of consumers and workers is rendering many old models invalid
• Retirement Planning requires changes in: Mindset, Tools & Asset Allocation
• SAA and SALM require better holistic and integrated understanding of asset price
and longevity dynamics