ON THE MONEY: Pain at the gas pump may be just the beginning

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By John Grace

Contributing Columnist

As a columnist, one primary purpose is to keep the complicated money matters simple and support you in preparing for the good, the bad and the unforeseen.

Thanks to my firm paying Dent Research for independent research since 1999, we learn that paying attention to demographics can be most helpful in seeing what’s around the corner that will be in demand and how things move out of favor based on age.

Age 14, for example, is the age most Americans peak in consuming potato chips, per the U.S. Census Bureau. That means as parents, we bought the most potato chips in our lives at age 41 when our children were on average 14. While we are unique individuals, most of us have not been able to see how we move in a herd pattern, not much different than cows in the field.

As the world turns, we moved into completely unchartered territory and we will not be moving back to where we were. For the first time ever, starting in 2019, there are more people over 65 than under 5, reports the World Economic Forum. In fact, the world’s population is aging while many countries’ birth rates, including the U.S., fail to keep up.

John Grace

Instead of getting younger, the world’s population is getting much, much older. This has sweeping implications for global growth. With fertility rates in decline and an aging population, what follows is depressed productivity, labor-force participation, and stagnant inflation. Some of the indirect results of worldwide declining birth rates may indeed impact macroeconomic factors like the demand for homeownership.

In addition, the U.S. life expectancy continues our historic decline with another drop in 2021, according to the U.S. Census Bureau. Life expectancy in the U.S. fell from 79 in 2019 to 77 in 2021. Life expectancy in other developed countries, like the U.K., Canada and Japan, are all north of 80.

When we look closer under the hood at life expectancy by race we see that in the U.S., Hispanic Americans experienced the greatest drop in life expectancy by three years and Black Americans saw a decrease of 2.9 in 2020. Per the New York Times, “Fueled by the coronavirus pandemic, the 18-month drop was the steepest decline since World War II.”

Dr. Mary T. Bassett, a former New York City health commissioner and professor of health and human rights at Harvard University, posits that the coronavirus “uncovered the deep racial and ethnic inequities in access to health, and I don’t think we’ve ever overcome them.”

Americans with resources and better health care are living longer than average. But don’t get lost in the weeds of how well your family might be doing. Pay attention to the national averages first, and make the outliers, those with better education, greater income and more assets a distant second on your priority list.

Based on our understanding of the weak demographic trends, which may continue in the U.S. through 2022-23, the economy may react very poorly to the Federal Reserve’s withdrawal of unprecedented stimulus. In fact, the economy may not respond much differently than a heroin addict in detox. It won’t be pretty.

As gas prices continue to reach new heights, it would not be unreasonable to see these United States of America in a deep recession by the end of this year. By taking the time to prepare now, you won’t be in shock and awe later.

John Grace is a registered representative with LPL Financial. His On the Money column runs monthly in The Wave. The opinions voiced are for general information only and are not intended to provide specific advice or recommendations for any individual.

 

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