Noah, on 05 August 2013 - 11:37 AM, said:
The Shiller P/E, which you linked, is for the SP500. What are the demographic issues that will restrict economic growth until 2020?.
I intended to link to one of the S&P. Better guage of things IMO. The NASDAQ is too narrowly tailored and the small number of companies and the weighting of the DOW can lead to over or under performance of a few companies skewing the results.
As far as the demographic issues, it's mostly the relative aging of the population over the next few years. A large component of US GDP is consumption, and on average older people don't consume as much as younger people in the prime of their lives. There's another population "echo" surge that started shortly after I was born in the early 80s that should give a growth surge once they hit their prime. My estimation is that's going to be the 2020-2023 time frame but till then we won't see a big increase in consumption spending.
Short of us suddenly running a trade surplus or massive surges in gross investment, GDP does not look to increase much over that time frame.
Secondary effect of the aging population is the effect on markets. The 401k as we know it was essentially "invented" in 1980. Those people who started paying into the markets 30 years ago, are getting ready to retire, at which point they'll stop paying in and quite likely start drawing out. A large number of people switching 180 degrees from buyers to sellers stands to be a drag on the market top line....
Population growth rate chart...
Edited by nova, 05 August 2013 - 01:21 PM.