What is the 'Boomer Effect (Baby Boomer Factor)'?

The boomer effect refers to the influence that the generational cluster born between 1946 and 1964 has on the economy and most markets. This term first gained traction in the realm of technology and referred to the importance of simplifying the interfaces of consumer electronics to encourage the wealthy baby boomer generation to upgrade.

The term is now used to describe everything related to boomers; for example, their consumer habits, social media preferences, how marketers target the boomer generation and how the financial services sector can best serve boomers as their priorities shift later in life. The boomer effect is sometimes called the boomer factor or the boomer shift.

BREAKING DOWN 'Boomer Effect (Baby Boomer Factor)'

Following World War II, in 1946, more babies were born than ever before: 3.4 million,, which is 20 percent more than in 1945, according to History.com. This marked the beginning of the so-called “baby boom.” In 1947, an additional 3.8 million babies were born, a further 3.9 million were born in 1952 and over 4 million were born every year from 1954 until 1964. At this point, baby boomers represented 40 percent of the nations population.

Today, baby boomers hold a large amount of the wealth in North America making them a prime market segment. As they have aged, baby boomers have shaped the focus of companies. Examples are the wide range of anti-aging products that target the generation, real estate aimed at people who seek to live longer independently, investment in health care, transplants, and advanced medical technology. Baby boomers are living longer than any generation before them.

Baby boomers are also having affecting labor markets because they are remaining in the workforce for longer and holding onto jobs that would otherwise be filled by the next generation. This has had a positive impact on businesses because studies have shown a drop in productivity when boomers retire due to the loss of organizational intelligence. However, retirement at an older age may simply be delaying productivity reckoning until a future date.

Investing In the Boomer Effect

The baby boomers collectively have created trends that disproportionately benefit particular industries; therefore, investors can position a portfolio to take advantage of the boomer effect. Most of these investment opportunities are in the medical or medical services sector. Orthopedic manufacturers, affordable care homes, medical device makers, and pharmaceutical manufacturers will continue to show growth as more boomers age.

The oldest baby boomers today are already in their 60s. By 2030, one-fifth of the U.S. population will be older than 65, and some experts believe that the aging of the population will strain social welfare systems.

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