The U.S. Economy’s Secret Weapon: Seniors With Money to Spend - Kanebridge News
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The U.S. Economy’s Secret Weapon: Seniors With Money to Spend

Americans 65 and older account for record share of spending and are less susceptible to interest rates

By GWYNN GUILFORD
Wed, Oct 11, 2023 8:25amGrey Clock 4 min

Why has consumer spending proven so resilient as the Federal Reserve has raised interest rates? An important and little-appreciated reason: Consumers are getting older.

In August, 17.7% of the population was 65 or older, according to the Census Bureau, the highest on record going back to 1920 and up sharply from 13% in 2010. The elderly aren’t just more numerous: Their finances are relatively healthy and they have less need to borrow, such as to buy a house, and are less at risk of layoffs than other consumers.

This has made the elderly a spending force to be reckoned with. Americans age 65 and up accounted for 22% of spending last year, the highest share since records began in 1972 and up from 15% in 2010, according to the Labor Department’s survey of consumer expenditures released in September.

“These are the consumers that will matter over the coming year,” said Susan Sterne, chief economist at Economic Analysis Associates.

“Our large share of older consumers provides a consumption base in times like today when job growth slows, interest rates rise and student-debt loan repayments begin again,” she said.

Seniors’ high spending propensities reflect health, wealth and perhaps lingering psychological effects of the pandemic.

“All my life it was, save for this, save for that,” said Maureen Green, 66, of Cape Cod, Mass. “Now there’s money in the bank and I’m spending in ways that bring me closer to friends and family than I did before.”

Green, a real-estate agent with four grown children living across the country, estimated she is spending 25% more and twice as much time traveling now compared with 2019. She recently traveled to Syracuse, N.Y., to catch a photo exhibit with friends, and toured Rhode Island with her son and his girlfriend.

“The one million Americans who didn’t survive Covid—that’s part of it. That taught me not to let time go by because before I know it, that time won’t be there anymore,” she said.

Living better, longer—and larger

“The lifestyle of the senior has changed dramatically—they’re more active than ever,” said Marshal Cohen, chief retail adviser of Circana, a research firm specializing in consumer behavior. That has expanded the menu of recreation on which to spend, he said. “They’re riding e-bikes, they’re hiking, they’re traveling. And they’re doing these things for longer than they’ve ever been done.”

The average household led by someone age 65 and older spent 2.7% more last year than in 2021, adjusted for inflation, according to the Labor Department, compared with 0.7% for under-65 households. Spending by older households is up 34.5% from 1982, compared with 16.5% for younger households.

Comparable data isn’t available for 2023. However, consumers older than 60 reported spending 7.9% more in August than a year earlier, compared with a 5.1% increase among those age 40 to 60 and a 4.6% gain for younger consumers, according to a survey by the New York Fed. The data aren’t adjusted for inflation.

The growing yen to spend by the elderly is amplified by their sheer numbers. The unusually large cohort of baby boomers, the youngest of which are 59, are reaching their retirement years en masse.

American Cruise Lines, which gears its cruises toward older consumers, said it is seeing double-digit sales growth this year, driven largely by boomers. The Guilford, Conn., company this year added three ships to its fleet and expanded its season by a month for some popular routes.

“River cruising has traditionally attracted an older audience, and with more boomers retiring each year, we see both a rapid rate of growth and demand for longer experiences,” said Charles B. Robertson, the company’s president and chief executive.

The economy’s silver bullet

Another factor in the elderly’s favor: relatively strong finances. Americans age 70 and older now hold nearly 26% of household wealth, the highest since records began in 1989, according to the Federal Reserve.

While economists still see a relatively high probability of recession in the coming year, Ed Yardeni, president and chief investment strategist of Yardeni Research, isn’t one of them. An important reason: By the Fed’s reckoning, baby boomers alone have now amassed $77.1 trillion in wealth. “There’s a $77 trillion-wide hole in the theory that consumers’ running out of pandemic savings will sink the economy,” he said.

They have less consumer debt, minimal student debt and are more likely to own their homes outright. Many of those who have mortgages refinanced at the unprecedented low in mortgage rates after the pandemic hit. They are also less likely to need to move due to an expanding family or a new job than Gen Z and Millennials, shielding them from the impact of rising housing costs.

Retirees also received an 8.7% cost-of-living-adjustment bump to Social Security payments in January, the largest single-year increase since 1981, and an automatic adjustment to offset last year’s 9.1% inflation peak.

These factors have cushioned seniors from the twin scourges of inflation and high interest rates. And since most of them are retired, seniors’ spending is less vulnerable to the rise in unemployment that many economists anticipate in coming quarters.

Subscription demand for the Cincinnati Opera’s summer festival this year was surprisingly strong and driven by older patrons, said Todd Bezold, director of marketing.

“Despite the multiyear trend in subscriptions going down, down, down in every art form, we went up this year—by 3%,” he said. That jump in demand came despite a sharp rise in ticket prices to account for several years of inflation. “The vast majority of our subscribers are baby boomers; we know that much.”



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To Find Winning Stocks, Investors Often Focus on the Laggards. They Shouldn’t.
By KEN SHREVE 12/06/2024

These stocks are getting hit for a reason. Instead, focus on stocks that show ‘relative strength.’ Here’s how.

By KEN SHREVE
Wed, Jun 12, 2024 4 min

A lot of investors get stock-picking wrong before they even get started: Instead of targeting the top-performing stocks in the market, they focus on the laggards—widely known companies that look as if they are on sale after a period of stock-price weakness.

But these weak performers usually are going down for good reasons, such as for deteriorating sales and earnings, market-share losses or mutual-fund managers who are unwinding positions.

Decades of Investor’s Business Daily research shows these aren’t the stocks that tend to become stock-market leaders. The stocks that reward investors with handsome gains for months or years are more often  already  the strongest price performers, usually because of outstanding earnings and sales growth and increasing fund ownership.

Of course, many investors already chase performance and pour money into winning stocks. So how can a discerning investor find the winning stocks that have more room to run?

Enter “relative strength”—the notion that strength begets more strength. Relative strength measures stocks’ recent performance relative to the overall market. Investing in stocks with high relative strength means going with the winners, rather than picking stocks in hopes of a rebound. Why bet on a last-place team when you can wager on the leader?

One of the easiest ways to identify the strongest price performers is with IBD’s Relative Strength Rating. Ranked on a scale of 1-99, a stock with an RS rating of 99 has outperformed 99% of all stocks based on 12-month price performance.

How to use the metric

To capitalise on relative strength, an investor’s search should be focused on stocks with RS ratings of at least 80.

But beware: While the goal is to buy stocks that are performing better than the overall market, stocks with the highest RS ratings aren’t  always  the best to buy. No doubt, some stocks extend rallies for years. But others will be too far into their price run-up and ready to start a longer-term price decline.

Thus, there is a limit to chasing performance. To avoid this pitfall, investors should focus on stocks that have strong relative strength but have seen a moderate price decline and are just coming out of weeks or months of trading within a limited range. This range will vary by stock, but IBD research shows that most good trading patterns can show declines of up to one-third.

Here, a relative strength line on a chart may be helpful for confirming an RS rating’s buy signal. Offered on some stock-charting tools, including IBD’s, the line is a way to visualise relative strength by comparing a stock’s price performance relative to the movement of the S&P 500 or other benchmark.

When the line is sloping upward, it means the stock is outperforming the benchmark. When it is sloping downward, the stock is lagging behind the benchmark. One reason the RS line is helpful is that the line can rise even when a stock price is falling, meaning its value is falling at a slower pace than the benchmark.

A case study

The value of relative strength could be seen in Google parent Alphabet in January 2020, when its RS rating was 89 before it started a 10-month run when the stock rose 64%. Meta Platforms ’ RS rating was 96 before the Facebook parent hit new highs in March 2023 and ran up 65% in four months. Abercrombie & Fitch , one of 2023’s best-performing stocks, had a 94 rating before it soared 342% in nine months starting in June 2023.

Those stocks weren’t flukes. In a study of the biggest stock-market winners from the early 1950s through 2008, the average RS rating of the best performers before they began their major price runs was 87.

To see relative strength in action, consider Nvidia . The chip stock was an established leader, having shot up 365% from its October 2022 low to its high of $504.48 in late August 2023.

But then it spent the next four months rangebound—giving up some ground, then gaining some back. Through this period, shares held between $392.30 and the August peak, declining no more than 22% from top to bottom.

On Jan. 8, Nvidia broke out of its trading range to new highs. The previous session, Nvidia’s RS rating was 97. And that week, the stock’s relative strength line hit new highs. The catalyst: Investors cheered the company’s update on its latest advancements in artificial intelligence.

Nvidia then rose 16% on Feb. 22 after the company said earnings for the January-ended quarter soared 486% year over year to $5.16 a share. Revenue more than tripled to $22.1 billion. It also significantly raised its earnings and revenue guidance for the quarter that was to end in April. In all, Nvidia climbed 89% from Jan. 5 to its March 7 close.

And the stock has continued to run up, surging past $1,000 a share in late May after the company exceeded that guidance for the April-ended quarter and delivered record revenue of $26 billion and record net profit of $14.88 billion.

Ken Shreve  is a senior markets writer at Investor’s Business Daily. Follow him on X  @IBD_KShreve  for more stock-market analysis and insights, or contact him at  ken.shreve@investors.com .