Boomer Effect (Baby Boomer Factor)

DEFINITION of 'Boomer Effect (Baby Boomer Factor)'

The boomer effect refers to the influence that the generational cluster born between 1946 and 1964 has on most markets. This term first gained traction in technology and generally referred to the importance of simplifying interfaces for consumer electronics to encourage the wealthy baby boomer generation to upgrade. Since then, it has spread to describe everything from the way boomers have changed how food is marketed to the impact on the financial services sector as boomer’s shift priorities late in life.

The Boomer effect is sometimes called the boomer factor or the boomer shift.

BREAKING DOWN 'Boomer Effect (Baby Boomer Factor)'

Baby boomers hold a large amount of the wealth in North America, making them a prime market segment. As they have aged, the baby boomers have shaped the focus of companies. The obvious effects includes the wide-range of anti-aging products, real estate aimed at people seeking to live independently longer, more investment in replacements, transplants and other medical technology - like no other generation before them, the baby boomers are sticking around.

This is also having an effect on labor markets as boomers have stayed around longer working and holding onto jobs that would otherwise be filled by the next generation. And this has generally been positive for businesses as studies have shown a productivity drop when boomers retire due to the loss of organizational intelligence. However, delayed retirement is only pushing the productivity reckoning further into the future.

Investing In the Boomer Effect

The baby boomers collectively have created trends that disproportionately benefit particular industries, so an investor can position a portfolio to take advantage of the boomer effect. Unsurprisingly, most of these opportunities are in the medical or medical services sector. Orthopedic manufacturers, affordable care homes, medical device makers, and pharmaceutical makers will see already strong demand grow as more boomers push the limits of old age.

There is a larger question of what happens to the wealth - how many boomers will spend it and how many will pass it on - but that particular boomer effect has yet to be measured.