The Stock Market Will Break: When Population Growth Dies

If you have a retirement nest egg, it’s been growing around 12% per year for the last decade (if you are 100% stocks), but that only works because there are less-wealthy “working people” trying to lift themselves up by their bootstraps (i.e. they get jobs at all these publicly-traded companies (stocks) that generate big profits (on average 12% per year) by producing things people buy (like cars, gasoline, homes and whatever else they advertise on social media)).

But when population growth dies, the economy stops growing, and stock market returns become basically non-existent. This is essentially what happened in Japan, as their stock market has been terrible for decades now (especially as compared to the US).

To put it in not-so-nice terms, the stock market is basically a giant Ponzi scheme that requires a growing population after you to generate the big outsized returns many of us have become accustomed to.

So the first chart in this report (that shows US population growth slowing) is concerning.

Good News:

However, the good news is the high immigration shows people are still coming to the US (for jobs). This means there continues to be high growth and economic opportunity for those of us counting on the stock market to help sustain us in retirement many years into the future.

But if/when that population growth ever stops (or even turns negative) then lookout below for stocks!!

Note: As for me, I am still very long US stocks for the long term, as I believe the population growth (and outsized long-term stock market returns) will continue in the US for decades!