Regarding emerging markets I would recommend reading "The time travelling economist" book. According to its thesis, in many countries the falling fertility rate is one of the key requirements to help the country out of poverty, i.e. increasing GDP per capita.
I liked the article - good mental exercise. I will incorporate some ideas in my investment process. I've actually been looking at some potential financial beneficiaries (annutities and reverse mortgages), but haven't made a move yet.
You mentioned that AI/robotics/automation/cloud infra will be beneficiaries in this new demographic reality. Then I would not be so quick in discarding commodities, like energy, steel, cement, etc. It's projected, that we will need immense amounts of energy and building materials to build and power all these AI data centers.
Plus, developing countries still have to catch up with developed countries in terms of quality of life. You need vast amounts of energy and commodities for this as well.
I wonder when Governments will start to shape tax policy based on how many kids you have, with those having >2 kids having a -ve tax rate; and then maybe even start to become coercive to those who stay childless, through fines or confiscatory tax rates. I think Hungary is experimenting with this, and some of the MAGA folks have suggested similar ideas (which probably doesn't help with getting traction).
I used to joke that what Japan needed to do was put clomiphene citrate in the water (to induce multiple births) and hand out viagra/cialis like candy. Maybe that too ... and maybe not just in Japan.
Interesting; and I tend to agree. But the other side of the coin is that governments have to inflate their way out of debt even more so with less tax revenue coming in, so currency devaluation will offset a lot of these effects, at least as far as nominal prices are considered.
With the world population projected to peak in 2084, currently I consider this more of an academic problem than anything else. So probably ppl can just continue dollar-cost-averaging into their global stock indices.
Also, I'd say it's highly probable that AI and robotics will lead to breathtaking advances in productivity in years to come. This will more than compensate for decline in global GDP due to age mix.
I think that might depend on where you live, and how long are you going to live. European population is projected to peak in 2026, so if you're life projection is to live until 2100, you might be into trouble at some point...
Actually I count on both immigration and AI. When ppl will fully realise that they won't have a pension anymore, and that their salary is eaten up by social security contributions progressively more than it is eaten up already, anti-immigration politics will erode over time; and the (state) media will spread forcefully their pro-immigration narrative.
But apart from that, the productivity boost that AI will provide I believe is something we cannot even imagine now.
I might agree with your point on AI, but I’m a bit more cautious on immigration. There are studies from Denmark/Sweden showing that certain types of immigration have been a clear net negative economically. It really depends where people come from, what skills they bring, and how well they integrate. Immigration in Switzerland is not the same as in France or Sweden—or Spain, for that matter. As always, it depends.
As for AI and productivity—yes, we all hope it’s the answer. But I’m not so bullish on how fast countries (or their regulators) will adapt. Some might move fast, others will be stuck in endless committees or protecting legacy industries. So yeah, maybe the tech saves us… eventually. But there’s going to be a lot of noise and pain in the meantime.
Your point on immigration is well taken. As to AI, yes, at the end of the day, it's anyone's guess how that will pan out. I err towards the optimistic/progressive side.
The markets are not a zero sum game. This article has completely failed to take productivity gains from technological advancements and “knowledge” into account. Growth consists of not just labour and capital, but also these advancements. Also, the potential of LATAM, China and India is severely underestimated.
To say that the price of only commodities and sectors catering to the old will go up is a misguided view; we will see clean technologies, and critical minerals being traded. We see pension funds such as Norges Bank adjusting their portfolio to take into account natural capital, things that did not even have a monetary value attached to them will in the future.
Totally fair to bring that up—and I actually agree with most of what you said. But just to clarify: the article does mention this. In fact, it explicitly says that everything discussed is excluding the impact of adaptation, innovation, and productivity gains. That’s the whole point of the exercise—starting from the demographic baseline and asking what happens if we don’t adapt fast enough.
Quoting from the piece:
“There’s hope here, too. Human beings are extraordinarily good at adapting… Companies leveraging innovation, AI, automation, and productivity improvements—rather than endless market expansion—will thrive… Japan’s small caps, for instance, are quietly entering a new growth era by doing exactly that…”
So no, it’s not saying this will happen. It’s about taking the McKinsey report seriously, looking at the structural pressures, and asking how they might play out. There’s plenty of room for companies and countries to adapt—some already are. But that doesn’t mean we can ignore the headwinds. Ignoring them is exactly how you end up on the wrong side of the trade.
Great article.
Regarding emerging markets I would recommend reading "The time travelling economist" book. According to its thesis, in many countries the falling fertility rate is one of the key requirements to help the country out of poverty, i.e. increasing GDP per capita.
I liked the article - good mental exercise. I will incorporate some ideas in my investment process. I've actually been looking at some potential financial beneficiaries (annutities and reverse mortgages), but haven't made a move yet.
You mentioned that AI/robotics/automation/cloud infra will be beneficiaries in this new demographic reality. Then I would not be so quick in discarding commodities, like energy, steel, cement, etc. It's projected, that we will need immense amounts of energy and building materials to build and power all these AI data centers.
Plus, developing countries still have to catch up with developed countries in terms of quality of life. You need vast amounts of energy and commodities for this as well.
I wonder when Governments will start to shape tax policy based on how many kids you have, with those having >2 kids having a -ve tax rate; and then maybe even start to become coercive to those who stay childless, through fines or confiscatory tax rates. I think Hungary is experimenting with this, and some of the MAGA folks have suggested similar ideas (which probably doesn't help with getting traction).
I used to joke that what Japan needed to do was put clomiphene citrate in the water (to induce multiple births) and hand out viagra/cialis like candy. Maybe that too ... and maybe not just in Japan.
Good article - GS has a slightly more positive view plus some good charts --> https://www.gspublishing.com/content/research/en/reports/2025/05/20/2d3fe290-10b1-44be-8d0e-77b8d303928f.html
Interesting; and I tend to agree. But the other side of the coin is that governments have to inflate their way out of debt even more so with less tax revenue coming in, so currency devaluation will offset a lot of these effects, at least as far as nominal prices are considered.
With the world population projected to peak in 2084, currently I consider this more of an academic problem than anything else. So probably ppl can just continue dollar-cost-averaging into their global stock indices.
Also, I'd say it's highly probable that AI and robotics will lead to breathtaking advances in productivity in years to come. This will more than compensate for decline in global GDP due to age mix.
I think that might depend on where you live, and how long are you going to live. European population is projected to peak in 2026, so if you're life projection is to live until 2100, you might be into trouble at some point...
Actually I count on both immigration and AI. When ppl will fully realise that they won't have a pension anymore, and that their salary is eaten up by social security contributions progressively more than it is eaten up already, anti-immigration politics will erode over time; and the (state) media will spread forcefully their pro-immigration narrative.
But apart from that, the productivity boost that AI will provide I believe is something we cannot even imagine now.
I might agree with your point on AI, but I’m a bit more cautious on immigration. There are studies from Denmark/Sweden showing that certain types of immigration have been a clear net negative economically. It really depends where people come from, what skills they bring, and how well they integrate. Immigration in Switzerland is not the same as in France or Sweden—or Spain, for that matter. As always, it depends.
As for AI and productivity—yes, we all hope it’s the answer. But I’m not so bullish on how fast countries (or their regulators) will adapt. Some might move fast, others will be stuck in endless committees or protecting legacy industries. So yeah, maybe the tech saves us… eventually. But there’s going to be a lot of noise and pain in the meantime.
Your point on immigration is well taken. As to AI, yes, at the end of the day, it's anyone's guess how that will pan out. I err towards the optimistic/progressive side.
The markets are not a zero sum game. This article has completely failed to take productivity gains from technological advancements and “knowledge” into account. Growth consists of not just labour and capital, but also these advancements. Also, the potential of LATAM, China and India is severely underestimated.
To say that the price of only commodities and sectors catering to the old will go up is a misguided view; we will see clean technologies, and critical minerals being traded. We see pension funds such as Norges Bank adjusting their portfolio to take into account natural capital, things that did not even have a monetary value attached to them will in the future.
Totally fair to bring that up—and I actually agree with most of what you said. But just to clarify: the article does mention this. In fact, it explicitly says that everything discussed is excluding the impact of adaptation, innovation, and productivity gains. That’s the whole point of the exercise—starting from the demographic baseline and asking what happens if we don’t adapt fast enough.
Quoting from the piece:
“There’s hope here, too. Human beings are extraordinarily good at adapting… Companies leveraging innovation, AI, automation, and productivity improvements—rather than endless market expansion—will thrive… Japan’s small caps, for instance, are quietly entering a new growth era by doing exactly that…”
So no, it’s not saying this will happen. It’s about taking the McKinsey report seriously, looking at the structural pressures, and asking how they might play out. There’s plenty of room for companies and countries to adapt—some already are. But that doesn’t mean we can ignore the headwinds. Ignoring them is exactly how you end up on the wrong side of the trade.