One of the most significant economic trends today isn’t technological or political—it’s demographic. As America’s wealth becomes increasingly concentrated among retirees, the spending habits of this generation are creating long-term opportunities for businesses that cater to travel, leisure, healthcare, and other experience-driven industries. Today’s weekly market commentary examines this development, and of course, discusses what that might mean for investors.
The enclosed chart shows wealth accumulation in the United States. The data is broken out by age group and measured in trillions of U.S. dollars. The chart begins in 1990 and carries through to present day. Those under the age of 40 are represented by the purple shaded area. Those ages 40 to 54 are represented by the green shaded area. Ages 55 to 69 are the dark blue shaded area with those 70 and older made up by the light blue area.
As can be seen by the data, and as the piece explains, “the distribution of U.S. wealth has shifted markedly over the past 35 years, with older American s owning a far larger share than they once did, as shown in the chart above. In light blue, households aged 70 and older now hold over $57 trillion, up from roughly $4 trillion in 1990, and their share of total U.S. wealth has climbed from 19% to 32%. Notably, this group makes up only about 13% of the U.S. population, meaning a small and aging slice of the country now holds nearly a third of its wealth.” – AOM 481
It’s important to understand, as well, that much of the wealth creation for the 70+ cohort is a function of strong investment returns over the course of decades. On a total-return basis, the S&P 500 returned more than 3,900% since 1990.
And then as it relates to the 70+ cohort, the piece states in the close, “these households have both the means to spend and, freed from work, the time to do so. We believe their preference to spend on experiences over goods shows up most visibly in travel. For instance, river cruises and expedition voyages have become a defining category, alongside the intercontinental flights and the hotels and resorts that anchor these trips. Because this spending draws on accumulated wealth rather than current income, we believe it is potentially more durable than more credit-dependent demand from younger cohorts if economic growth slows.” – AOM 481
The broader investment theme is that demographic trends—not just economic cycles—can create long-lasting sources of demand. As wealth continues to migrate toward older Americans, companies serving this population may experience stronger and more stable revenue growth than the broader consumer sector.
We would ask that you review the attached piece at your convenience and please let us know if you have any questions or if you would like to discuss it further. And as we always end this correspondence, please remember that regardless of current momentum and regardless of the key takeaways in this weekly perspective, we will continue to monitor and manage with a thoughtful approach based on your specific long-term objectives.
