Baby Boomer Investing Could Keep Bull Market Alive

Second of three columns on economic, cultural and psychological factors that drive retirement investing by Baby Boomers.

‘Boomers rule,” rejoices investment strategist Robert J. Froelich.

“They have ever since they arrived on the scene wearing diapers,” revels the executive vice president of Scudder Kemper Investments Inc. “And they always will, until their generation is gone.”

It’s that simple, the Wall Street apostle of “Boomernomics” proclaimed during a recent interview in Spokane.

Froelich visited the newsroom between appearances at a business breakfast sponsored by the Spokane Valley Chamber of Commerce and an afternoon workshop for area investment advisors.

“Boomernomics,” he explained, “is the phenomenon of market demographics and global economics converging to ignite the next big investment boom.

“Just think of it: Every minute of every day - from Jan. 1, 1996, through the next decade - seven more Baby Boomers will turn 50,” he marveled. “My thesis is that, as they hit that magic half-century mark, virtually every one of them is suddenly going to become very serious about retirement, about saving, and hopefully about investing in the stock market.

“I really think the tremendous bull market of the past decade is just the tip of the iceberg, because the big bulk of the Baby Boomers’ impact on the stock market won’t be felt until 10 years out from where we are today.”

Then the stock market will be swept along on a rising tide of “unbelievably strong Boomer savings and investment.”

Until now, spending on lifestyles, child rearing, and education have largely absorbed Boomers’ attentions and paychecks.

Now however, heading into their peak earning years and having largely satisfied these other familial demands, Boomers increasingly find themselves face to face with the reality of retiring. “So the inflow of money into the stock market from the Baby Boomers is absolutely going to explode over the next 10 years,” Froelich predicts.

“The other half of the big picture which I call Boomernomics,” says Scudder’s chief investment strategist, “is that we have a truly global marketplace today and the U.S. rules it. Over the past 10 years, U.S. corporations have downsized and adopted technology and productivity improvements, and now we get to compete globally.

“Those responsible for restructuring corporate America over the past 10 years have done all the right things,” Froelich says enthusiastically. “We’ve already done a corporate sea-change that Europe is just now thinking of doing. We are 10 years out in front of them in restructuring and strategic alliances.”

Few strategists are more exuberant.

Indeed, even in his own company, most analysts are considerably more conservative in outlook.

“Boomers don’t rule Wall Street,” says Maureen Allyn, managing director and chief economist for Scudder Kemper Investments. “Corporations rule.”

Today’s returns from restructurings that carried downsizing to extremes, overleveraged companies, and stripped assets to drive up prices temporarily are no substitute for tomorrow’s lost wages and job opportunities, she says.

“Baby Boomers have the sense that capitalism and the stock market are benign and friendly,” says Allyn. “In reality, they can be harsh and utterly unforgiving systems that produce excellent end results. But it is not a smooth and painless process.

“That’s why we urge investors to exercise due caution, diversify, lower expectations, recognize there really isn’t a painless way to get ready for retirement,” says Allyn.

“I am in the minority,” Froelich freely admits. But he points out, the majority couldn’t even imagine the market would bolt from 3,000 at the start of the ‘90s to nearly 9,000 today.

“With Boomernomics kicking in, we’ll be at 10,000 by year end,” he predicts. “We’ll break through 15,000 in the next five years. Within the next 10 years, we’ll probably top 25,000.”

, DataTimes MEMO: Associate Editor Frank Bartel writes on retirement issues each Sunday. He can be reached with ideas for future columns at 459-5467 or fax 459-5482.

The following fields overflowed: CREDIT = Frank Bartel The Spokesman-Review