Every week Barrons has a selection of market views from various financial institutions. This week they had one from Deutsche Bank called A Coming Generational Conflict which caught my eye.
The widening generational divide should be a key source of alarm investors, financial markets and society as a whole. Young people perceive themselves as losers on issues ranging from housing to climate change to student debt. This anger is manifesting itself in political outcomes, with elections around the world increasingly fought along generational lines.
We believe this intergenerational conflict will get worse in the near term. Aging populations are tilting the balance further against the young. Expensive house prices are continuing to create anger and resentment. And the Covid-19 pandemic, which has disproportionately hurt the young economically, risks inflaming this resentment further.
There are three paths down which this conflict may travel. The first is a natural resolution, where large falls in asset prices set against demographic change narrow the generational divide without external intervention.
The second scenario sees a political party elected with strongly redistributionist policies. Some countries have already seen strong performances from such parties, and if this becomes more widespread, investors can expect an abrupt and significant upheaval in housing and asset markets, tax systems, climate policy and many other areas. This scenario becomes more likely toward the end of the decade as younger voters exceed those in older generations.
Another social change significant for those of us on GT could a more permanent change in the way the Second Amendment is viewed. Obviously all of us have anecdotal evidence to the contrary, but reading this gave me food for thought. What do you all think?
All they need is a good spanking.