Those baby boomers — first they protested the war in Vietnam and now, they’ve once again got the government concerned about their contrarian behavior. This time, the boomers won’t spend.
“Federal Reserve officials say they’re concerned that retirees … are blunting the impact of record easing aimed at creating jobs. The reason: Older people are more likely to forgo purchases of houses, cars and other big-ticket items that the Fed is trying to encourage with near-zero interest rates. And their numbers are growing, making the Fed’s task ever harder,” according to a recent article by Bloomberg.
“‘Spending decisions of the older age cohorts are less likely to be easily stimulated by monetary policy,’ William C. Dudley, president of the Federal Reserve Bank of New York, said in a speech on Oct. 15, helping to explain why the economic recovery has been weaker than expected.”
The bad news: Retirees and baby boomers are shunning purchases that might help the economy take off.
“The postwar generation is shifting spending toward education, mortgage debt and their adult children and away from entertainment, dining, furniture and clothes, according to a report last month from the National Center for Policy Analysis, a Dallas-based research group that advocates free markets,” the article notes.
The good news: “The demographic shift will benefit companies such a UnitedHealth Group Inc. (UNH), the largest U.S. health insurer, and Teva Pharmaceutical Industries Ltd. (TEVA), which manufactures generic drugs, according to James Kee, who helps oversee $1.9 billion as president of South Texas Money Management Ltd., in San Antonio, Texas.
“Also likely to benefit: manufacturers and retailers of discount consumer products, according to Brian Jacobsen, who helps oversee $207.5 billion as chief portfolio strategist at Wells Fargo Advantage Funds in Menomonee Falls, Wisconsin.
“Retirees will ‘be more price sensitive, and so perhaps that’s going to benefit those businesses that really target some of the lower price points,’ he said.”
Far out!
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