Demographic Acceleration

Pfäffikon SZ, Switzerland – The false start of 2016 on the global stock markets was one of the worst ever. However, when we take into account the closing prices of yesterday take into account, nothing seems to be happening. Why have investors made a fuss in January? However, the continuation of the stock market in 2016 is certainly not a done deal.

Baby Boomers
I have already emphasized the demographic impact on our society and how little information is available about it. This demographic shift delivers many investor worries. Coincidence or not, but the first wave of baby boomers are completely dependent on their pensions from this year. The majority of this population is still alive and will (legally) rely on their retirement money. Pension funds are not stupid, and they see this dark cloud coming in the future. It is, therefore, logical that some large pension funds operate on the selling side of the market and continue to do so for the time being.

Free Money
It is not excluded that the demographic acceleration will have an additional negative impact on the financial markets. Add to that the in general mixed economic picture, a fragile China being in transition, a possible Brexit and you understand that 2016 will not be easy. Not to mention the crash in the commodity sector and the U.S. elections. This week, in any case, it became clear again that everything will depend on the words of the Fed and ECB. However, more and more market researchers make comments on their policies and, also, there is decreasing confidence. To alert investors, I recommend following the correlation between the Nikkei and the S&P 500. It gives you insight into the effectiveness of free money in relation to the world’s main stock index. More important perhaps is that you also get an indication of when the ‘free money politics’ has been elaborated. The Nikkei has already declined 12% this year.

First Warning
Despite the strong recovery of the financial markets in the last month, my indicators recently issued a first warning. Additionally, the present market is not carried by a strong upward volume. To give you an idea; since August 2015, the downward force in the S&P 500 lies approximately 30% higher than the upward. This confirms my impression that institutional money is not responsible for the current increase. Since 9/11, I have done much research into the development of a possible bear market. We are still far from such a scenario, but the similarities with 2007, 2008, and to a lesser extent in 2011 in terms of data into my system are striking.

Investors would do well to operate carefully and above all to stick to their long-term investment objectives. The current fragile economic era combined with the accelerating demographic factor makes me hesitant. Currently, my focus is more on overvaluations instead of undervaluations as these are likely to appear frequently over time.

It remains for me to wish you a good weekend.


Jan Dwarshuis is a senior asset manager at Thirteen Asset Management AG, where he is responsible for the Thirteen Diversified Fund. Dwarshuis writes his columns in a personal capacity and is not paid for them. Nor is he paying for his columns to be placed. Professionally, he holds positions in major European, American and Russian stock funds. The information in his columns is not intended as professional investment advice or a recommendation to make certain investments. At the time of writing, he has no position in the above mentioned shares and has no intention of doing so in the next 72 hours.