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Macroeconomic Insights

The Long & Short of It: The Demographic Shift

Demographics only explain a small proportion of the variation in inflation and asset prices over time and across countries, according to Neill Nuttall of Goldman Sachs Asset Management. Conventional wisdom has long predicted that a rapidly aging population will have an outsized impact on assets as retiring baby boomers, for example, sell their stocks in favor of fixed income and contribute to disinflationary forces. But after adjusting for rising life expectancies, demographic changes on inflation and growth are more muted than previous studies would suggest and, instead, will be modestly supportive for US inflation and modestly negative for equities and bonds, says Nuttall who outlined findings from a recently published Global Portfolio Solutions paper, Much Ado About Something? Demographics, Inflation and Asset Prices. “The business cycle still remains the key driver of asset prices in coming years,” he notes.