When the coronavirus pandemic first struck in early 2020, some speculated that lockdowns would lead to a boom in American births as couples were forced to stay home. The opposite happened instead: U.S. population growth decelerated in 2020 and even further last year, to the slowest pace in the 246-year history of the nation, according to census data . Declining birth rates, elevated deaths from Covid-19, and less immigration created the first year since 1937 that the country’s population grew by less than 1 million people. “The big story is the U.S. hitting essentially zero population growth” of about 0.1% last year, William Frey , the veteran demographer and senior fellow at the Brookings Institution, said in an interview. The Covid-19 pandemic sped up what has been the most significant demographic trend shaping our species in recent decades: declining fertility rates around the world . The average family had five children in 1952; today, the figure is now under three and falling. In the U.S., while the baby boomer generation of those born between 1946 to 1964 are aging into retirement, younger generations including millennials aren’t reproducing as rapidly, creating a “double-barreled effect” where the population’s proportion of child-bearing women is shrinking, Frey said. The combination of fewer babies and lengthening lifespans (excluding the recent impact of Covid) means that the U.S. population has been growing older, as is true for most of the rest of the planet. Even formerly high-growth regions of Latin America and Asia have slowed down; only Africa has fertility rates higher than the 2.1 births per mother replacement rate. ‘Our gray future’ The upshot is that the world’s population is expected to rise from 7.7 billion in recent years to 9.7 billion by 2050 and peak at about 11 billion in 2100, according to the United Nations. Researchers at the University of Washington forecast a much earlier peak of 9.7 billion human s by 2064, after which the population declines, thanks to more aggressive assumptions on declining fertility. “The old now outnumber the young globally,” said Taimur Hyat , chief operating officer for PGIM , the asset management arm of Prudential Financial. ” In the developed markets, you have more people over 65 than under 15 . Even including the developing world, you will have more people over 65 than under 10 globally by 2040.” The shift has massive implications for the U.S. and all other nations. For a glimpse into our gray future, consider Italy and Japan, where seniors already outnumber the young and the labor force is in decline. By 2060, nearly one in four Americans will be 65 years of age or older, the number of those age 85 or more will triple, and there will have a half million more centenarians, according to the U.S. Census Bureau . The country could see a stagnant or even declining labor force by 2035 under scenarios with low or zero immigration, according to Frey. Population aging is happening faster in emerging markets than in the developed world, thanks to the history of China’s restrictive reproductive policies and rapid aging in India, according to Hyat. By 2050, at least 80% of the world’s over 65 population will be in emerging markets, he said. Addressing a worker shortage An increasing subset of professional investors are focusing on themes relating to these trends. For instance, Alan Patricof , the veteran venture capitalist who founded Apax Partners, created a fund in 2020 focused on technology for aging Americans. Even investors who aren’t explicitly targeting the so-called silver tsunami of aging boomers cite demographics as a tailwind. One such firm, the early-stage venture capital firm TSCV , focuses on health technology and so-called deep tech companies working in artificial intelligence and robotics. The Silicon Valley-based firm’s previous hits include seed-stage investments in Zoom and Carta . A key theme for TSCV investments are innovations to address impending labor shortages. They’ve invested in start-ups that use AI to automate precision manufacturing for electronics and self driving technology for long-haul trucks, according to partner Spencer Greene . Another is helping improve efficiency in health-care processes. “You see what happened in Japan,” Greene said. “If you look at the next 50 years, that’s where the developed world is going.” The demographic trends spurred Bank of America ‘s institutional research department to canvas its global equity teams to generate a list of 50 stocks that will capture more customers and revenue in an aging world, according to a pair of massive reports published last month. For instance, AMN Healthcare , provides staffing and consulting to health care facilities in the U.S., which will see rising demand as Americans age. The fact that the U.S. population and the global population will look so different 20 years from now will create big headwinds and tailwind factors for certain sectors. Chief operating officer, PGIM Taimur Hyat Financial names include Prudential , a life and health insurer focused on emerging markets, and global investment banks JPMorgan Chase and UBS , according to the researchers. When it comes to property, the bank recommended Welltower , a real estate investment trust that targets health-care real estate and has stakes in almost 1,400 facilities in the U.S., Canada and the U.K., including nursing homes and senior housing. It also named UDR , another REIT that owns and operates more than 52,000 apartments in communities across the U.S. And it cited D.R. Horton , one of the largest U.S. home builders, which tends to focus on first time buyers and those looking to upgrade in the West, Southeast and South Central states. The investment bank also named Progyny , a provider of fertility benefits for employers. The rising need for temporary workers amid a shrinking workforce could help ASGN , a provider of temp staffing and professional services, Bank of America said. It also named freelancer marketplace Upwork as a beneficiary. A longer lifespan Gradual increases in human lifespan are expected in the coming decades; the average person born in 2020 is expected to live 72.3 years, which could rise to 76.8 by 2050, according to German consultancy Roland Berger. But it’s possible that breakthroughs in cancer treatments or longevity drugs could boost life expectancy even further, according to a PGIM aging report . If anything, demographers in the past have consistently underestimated lifespan growth, according to Hyat, one of several authors of the 2016 report. “The fact that the U.S. population and the global population will look so different 20 years from now will create big headwinds and tailwind factors for certain sectors,” Hyat said. Older people controlled about $8.4 trillion in spending in 2020, a figure that will swell to $14 trillion over the next ten years, according to the World Data Lab. The spending patterns of older people are “quite dramatically different” from the young, Hyat said. While millennials frequent restaurants and spend more on education and clothing, the old tend to spend much more on nursing homes, hospitals and medicines and much less on cars and education, he said. Those assumptions underpin PGIM’s investable ideas, he said. Demand will rise for housing in places, including Florida and New England, where there is already a concentration of those aged 65 and above, according to the asset manager. For older cohorts, the need for new senior housing units in independent or assisted care communities is expected to rise by 850,000 units, according to research firm Senior Housing Analytics. Rents in senior housing communities tend to be stable compared to regular apartments because of high occupancy rates and demand, making the asset class relatively insulated from economic downturns, according to PGIM. Health-care spending was projected to reach $5 trillion by next year from roughly $3 trillion in 2016, according to the asset manager. Those over 85 spend double on health care than those aged 65 to 84, who in turn spend double the 45- to 64-year-old cohort, according to the company. “It makes sense for investors to deep dive into areas causing death in older people; so cancer, lung disease, Alzheimer’s, pneumonia, kidney infections, Parkinson’s, and to focus on biotech companies that are coming up with very targeted cures for dementia, stroke and Alzheimer’s,” Hyat said. Medical device manufacturers are also poised to benefit, according to Christopher Rossbach of London-based investment firm J. Stern & Co. He named companies including Becton Dickinson , Medtronic and Thermo Fisher Scientific . From real estate to ‘silver tech’ A related opportunity is investing in real estate that biotech startups and medical companies lean on, which are typically outside research centers near universities, PGIM said. That would be office space in or near Boston, San Francisco, San Diego, Seattle and Raleigh-Durham, North Carolina. “Competition for lab space is fierce, with low vacancy rates, helping to make Boston one of the largest and most expensive U.S. markets for life sciences firms,” according to the PGIM report. Another growth area is the “silver tech” category of startups that are creating apps and hardware to help the aged live more independently, maintain social and caregiver connections and cope with cognitive decline, said Hyat. “We see a range of opportunities in primary care such as personal emergency response” devices that can detect falls and gadgets that remind seniors to take pills, he said. “This trend has been accelerated by the pandemic given the need for telehealth.” The aging population isn’t a monolith, however. Age is one characteristic of several, including education levels, geography and wealth, according to Amlan Roy , a former demographics researcher at Credit Suisse and State Street who published a book this year entitled ” Demographics Unravelled .” “The fastest growing retirement segment in the world is 80-plus,” Roy said in an interview. “But an 80-year-old in Japan is different than a 80-year-old in Italy or France or Germany. Understanding that is important.” Roy, who has helped create demographics-related ETFs during his two decades on Wall Street, said that over the medium and long term, there are several broad areas of opportunity tied to aging. Those include pharmaceuticals and biotech as diseases including Alzheimer’s and Parkinson’s afflict more Americans; leisure and luxury services catering to wealthy older consumers, and financial services to help fund retirement, with a focus on women, who tend to outlive men. Surging health-care and pension costs will stress governments at the same time that declining workforce participation could result in smaller tax rolls. Solutions include encouraging more workforce participation by seniors and women and to incentivize immigration, according to Frey of the Brookings Institution. “The big pressure will be on taking care of all these older people,” Frey said. “Long-term care, safety, medicines, all of that will be important as more and more people won’t be able to take care of themselves.”
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