Boomers may stall equities for decades

Aging baby boomers may hold down U.S. stock values for the next two decades as they sell their investments to finance retirement, according to a paper from the Federal Reserve Bank of San Francisco. “U.S. equity values have been closely related to demographic trends in the past half century,” adviser Zheng Liu and researcher Mark Spiegel wrote in a paper. “In the context of the impending retirement of baby boomers over the next two decades, this correlation portends poorly for equity values.” The price-earnings ratio of U.S. stocks tripled between 1981 and 2000 as boomers reached their peak working ages, Mr. Liu and Mr. Spiegel wrote. Overseas investors' demand for U.S. stocks might help lessen the effect of a boomer sell-off, yet the impact would likely be limited, they wrote. “Foreign demand for U.S. equities is unlikely to offset price declines resulting from a sell-off by U.S. nationals,” the paper said.