Will retiring boomers spark a stock bust?
As if equity investors didn’t already have enough to worry about, one of the new concerns getting a lot of attention recently is that the baby boomer cohort — now starting to retire — will fund their retirement by selling equities. The “conventional wisdom” is that this supposed sell-off will result in a stock market bust.
It’s certainly true that the population is aging. In 1980, the ratio of workers to retirees was 5.2:1, and by 2025 it’s projected to be just 2.9:1. But that doesn’t necessarily mean the stock market will take a big hit.
To help you understand why, we’ll begin by pointing out that only unexpected events have an impact on stock prices. And if anything can be forecasted, it’s demographic data. You can be certain that investors in general are well aware of this trend, and thus have incorporated that knowledge and the expected effect of retirees’ equity sales into current prices.
Read the rest of the article at CBS Money Watch.