Investors predict wave of spending by older people

The world’s emergence from the coronavirus pandemic is set to unleash a wave of spending by older consumers, with increasing opportunities for investors in aging-linked stocks.

That’s the view of money managers who see huge pent-up demand from wealthy seniors for medical services and luxury goods.

They also expect that the forced adoption of the internet by older people during lockdown will open up this demographic permanently to e-commerce companies and social networks.

The number of people aged 65 and over is projected to double to more than 1.5 billion by 2050, greatly increasing their economic impact.

The total spending power of the older population globally was about $8.4 trillion in 2020, according to World Data Lab. That’s expected to grow to $14 trillion over the next decade.

“The pandemic has accelerated many of the issues related to aging populations and has highlighted the urgency of resolving them,” said Christopher Rossbach, chief investment officer at J. Stern & Co.

“We think they will be significant drivers for growth and investment.”

Underpinning the thesis are global fertility rates that are forecast to keep falling as life expectancy rises, even as the virus takes a staggering human toll. China’s decision last month to allow three-child families may have only limited impact on the aging trend in the most populous country.

Here are some key focuses of investors who argue that the aging theme will be even more important as economies move past the pandemic.

From cancer screening to hip replacements and cataract surgery, countless medical procedures have been postponed since the virus took hold. As this changes, global health-care spending is projected to bounce back in 2021, rising 5.8 per cent to $8.8 trillion, according to IHS Markit.

As well as long-delayed holidays, the travel sector is poised to pick up with support from cashed-up seniors.

“Older or richer people tend to want to visit relatives more,” said Sanjiv Bhatia, founder of Pembroke Emerging Markets.

Rossbach also has his eye on a rebound in luxury spending, with LVMH and liquor makers Pernod Ricard SA and Diageo Plc among his preferred reopening bets.

Rossbach expects growth across the board for companies that can tap seniors and their new-found confidence online.

“Think of all the parents and grandparents who have used social networks or video conferencing apps for the first time to stay in touch with their loved ones, or have bought their first products through e-commerce or ordered their groceries or meals through delivery services,” he said.