Are Baby Boomers Driving the Stock Market?

April 4, 1999. According to conventional wisdom, the baby boomers are pushing the market up.
Who can argue, considering they are adding to their retirement accounts in huge numbers. Right now about 40% of
American households own stocks in either pension funds or retirement accounts. Can this amazing figure continue?
Yes. But here are other cases that are driving the market.

Investors are selling stocks in order to buy big ticket items such as cars, homes, and whatever
else fits their fancy. Are they selling more stocks than they are buying? Yes. Is this a reason for concern? Not
really, because it will only make the demand for stocks more dear.

It’s very noticeable to me that investors are looking at mutual funds with a keener eye. U.S.
stock mutual funds have declined 12% for the past two years. In most individual portfolios, single issue stocks
have outperformed funds by a whopping 30%, and sometimes more if you’re into tech stocks. So after all this, what
is driving the market up?

The greater demand for stocks and decreasing number of available stocks will drive the prices
up. This is mainly caused by corporate mergers and stock buy back programs. Also, many popular stocks are being
bought on margin. As long as the bull market keeps going, more speculation will occur, thus higher stock prices.

So, are baby boomers really pushing the market up? Yes, but there are other important factors
to consider.


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