A Demographic Perspective on ETFs

by: Tom Lydon April 12, 2007 | about stocks: EEM / EFA / IEV    
Tom Lydon

Tom Lydon

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Demographics is(n't) Destiny but it can play a role in the rise and fall of civilizations and may influence where you invest, including exchange traded funds. Michael Krause for TheStreet.com compares populations of the international ETFs against the U.S. in terms of demographics.

In 25 years, the U.S. will be the fastest growing population, growing 23% and outpacing countries in iShares MSCI Emerging Markets (EEM). This population representation will grow 18% over the same time period, with South Africa, Russia and Korea bringing down the average.

Meanwhile, China's one-child policy has resulted in a slow-growing population with an unintended consequence of too many boys. Will China have the manpower necessary to sustain growth? Japan will be facing a large population decline in the next 25 years, as it currently has the largest population of people over age 65. This lowers the overall population growth for iShares MSCI EAFE (EFA).

A look at Europe finds that iShares S&P Europe 350 (IEV) could be affected by declines in several European countries including Germany, Spain and Italy.

This comparison was only made to provide perspective and shouldn't be used for short-term trading ideas. Our global economy makes location less a difference today, than it did 30 years ago - think of all the companies that have booming businesses abroad.

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This article has 3 comments:

  •  
    Apr 12 08:49 AM
    What I would love to know is what happens when aging American Baby Boomers (like me) start swapping stocks for bonds as they get "up there" in years? Perma-bear scenario?

    As for America's growing workforce-- could be good for Social Security, maybe... Likely to be BAD in general. The US is already beyond optimal in population density.

    Interesting post.
    Reply | Link to Comment
  •  
    Apr 12 01:04 PM
    The Chinese problem of too many boys can certainly not be referred to as an "unintended consequence." Chinese family culture revolves around the idea that boys are more desirable than girls, and I seriously doubt that Chinese leaders failed to take this into account when they implemented the one child policy. I think they just didn't care, because they bought into the "boys are better than girls" mentality.

    The real unintended consequence of a huge excess of men vs women in Chinese society is likely to be social and political destabilization. A large number of these men will be from the lower end of the economic spectrum, and sociologists agree that a group of under- or un-employed single men is a recipe for crime and rebellion.
    Reply | Link to Comment
  •  
    Apr 17 12:18 PM
    Very true, but in the meantime there is benefit to being exposed to theses countries. Currently, they have populations that are at their peak spending power.
    Reply | Link to Comment
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