This $75 Trillion Spending Boom Looms Large
Robert Ross|July 27, 2023
A Note From Andy: You may recognize the name atop today’s essay from our recent summer reading list… Robert Ross is a supersmart investor and trader and an all-around good guy. He’s one of the top investing guides out there. Hundreds of thousands of folks seek out his advice and expertise. When we came across his book, A Beginner’s Guide to High-Risk, High-Reward Investing… we knew he was Manward material. And now… we are thrilled to introduce him as Manward’s newest contributor. Be sure to send him a note of welcome at mailbag@manwardpress.com.
The stock and bond markets are telling two different stories.
The S&P 500 – which is currently 5% off its all-time high – is telling investors a new Roaring ’20s is upon us.
But the bond market – especially the inverted yield curve – is saying a recession is around the corner.
These two conflicting signals make it tough to see a clear direction for the markets.
But right now, my money is on the stock market keeping up its bull run, thanks to a massive $75 trillion spending spree coming down the pike.
Recession? What Recession?
The consensus going into 2023 was that the U.S. would fall into recession.
Everyone from JPMorgan Chase CEO Jamie Dimon to hedge fund manager Stanley Druckenmiller to BlackRock head Larry Fink expected the U.S. economy to contract this year…
But that hasn’t happened. The unemployment rate is at a 50-year low, inflation is on the run (for now) and GDP grew 2% in the first quarter.
Not that there aren’t signs of economic weakness (the inverted yield curve and falling industrial production, to name two). But on balance, I don’t see a recession hitting in 2023 or 2024.
People thought Europe would freeze last winter after Russia cut off gas supplies in retaliation for supporting Ukraine.
Well, that never happened… because oil and natural gas prices came back down to earth.
While normalizing energy prices will continue to act as a tailwind for the global economy…
A $75 trillion “boomer spending boom” will be more of a gale.
This “Boom” Is for Real
Every day, some 10,000 baby boomers hit retirement age. By 2030, all boomers will be in their retirement years.
This is a massive demographic shift that should be on every investor’s radar. Because when you drill down into the numbers, you see that the generation that brought us the Civil Rights Movement is now providing an unprecedented spending gale for the U.S. economy.
This generation had a net worth of $75 trillion at the end of the first quarter…
That’s over half of all wealth in the U.S.
While $19 trillion of that net worth is tied up in real estate, the bulk of it is parked in liquid assets.
That includes $8.9 trillion in bank deposits and money market funds alone, which should keep spending up even in a slowing economy.
This hoard of cash also got a nice boost from the surge in Social Security payments, which just saw their biggest bump in 30 years…
All of this is great news for the U.S. economy.
Spend, Baby, Spend!
The U.S. economy depends on people going out and spending money.
Consumer spending comprises 70% of our nation’s GDP. And with this $75 trillion spending boom heating up, the outlook is looking promising.
Some industries – and certain stocks – will benefit more than others.
At the top of my list are healthcare companies.
No matter what’s going on in the economy… folks don’t stop spending on their health. They don’t stop taking their prescription drugs or cancel a needed medical procedure.
Even more, per capita healthcare spending increases significantly from age 65 onward.
The second-most-obvious sector to benefit from this spending boom is the travel and tourism industry.
Many retirees have the time and money to take vacations. That’s good news for hotels, airlines and other travel-related industries.
The third sector I’m looking at is the real estate industry. Folks who have a substantial portion of their net worth tied up in real estate may decide to downsize, relocate or invest in different properties during their retirement years.
This creates opportunities in the real estate market for both residential and commercial properties.
The Boomer Spending Boom Is Just Starting
As an economist by trade, I’ve heard this quote many times in my career…
“The stock market has predicted nine out of the last five recessions.”
Given what we know about how spending dynamics fuel the economy, it looks like we can add the calls for a 2023 recession to the long list of false alarms.
I don’t expect this to be a flash in the pan. I expect the “boomer spending boom” to propel markets and the U.S. economy for years.
And my portfolio is positioned accordingly.
Robert Ross
Robert Ross’s unique style of clear and direct stock research helped him build a massive following in the investment research industry, starting his career at investment research company Mauldin Economics and quickly rising through the ranks to become one of the youngest chief analysts in the industry. Today, over a million investors turn to Ross every month for his take on investing, economics, and personal finance. He now shares his unique insights in Total Wealth and Manward Money Report.
