The “Silver Age”: Consequences of a higher life expectancy

People today live longer than in other period of history. The change is profound and affects every aspect of our lifes. Financial invesments should be adjusted accordingly.

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To live longer and better.

Due to the inherent evolution of mankind, our generational distribution is changing. A higher life expectancy, thanks to advances in medicine and a life oriented towards a healthy life, combined with a shrinking birth rate is modifying our vital habits. As if it were an investment, our time horizon has been extended. It is certainly good news to live longer and better, though the population agingcomes with unsettling changes of the current demographic balance. What’s the impact on the economy?

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In 2050 Spain will be among the top 3 countries in the world over 65.

All European populations are aging, but not necessarily at the same pace. In Spain, this process will be faster than in most countries. An estimated 25% of the population in 2030 will be aged over 65 and in 2050, Spain will be among the top 3 countries in the world in that category.

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The age and purchasing power affect consumption patterns.

This directly affects consumer targets and behaviour. The companies will have to rethink their approach to offer their products and services. It has been empirically demonstrated that there is an inverse correlation between inflation and an aging population: Countries with high inflation typically have a younger population, while countries with low inflation (developed economies) coincide with aging populations. In the recent past, this absence of inflation has been one of the main catalysts of financial markets and the main driver for monetary policy decisions by the central banks.

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Many companies take advantage of the unstoppable trend «wellness».

This change should be regarded as an opportunity and an achievement for our society, as well as for our investments today and in the future. What are the sectors that benefit the most at this juncture? Basically the pharmaceutical industry and the health care sector, but let’s not forget industries related to leisure and beauty care: There is a growing demand for cosmetics related to skincare. Within the eagerness to improve our health, the wellness trend seems unstoppable as a result of an initiative to find an optimal, comprehensive and balanced state of health.

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The reform of old housing is a sector with a lot of projection.

Although the trend is not exclusively linked to elderly people, it is noteworthy that this group spends a growing part of their savings (and their time) in activities with positive results for their well-being.

The trend will also have a lasting impact on the real estate sector: Just think of maintenance, of reforms or of adjustments of the habitat due to lesser physical mobility that comes with age. On the other hand, technologies that go from means of communication to modified cars should not be forgotten. Today, investing in companies focused on products and services for people who are coming of age goes under the name of the “Silver economy”: It derives from the Greeks to whom the part of life that followed the golden age of plenitude of a human being used to be described as the “Silver age”.

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More and more companies positioned to provide coverage for the elderly.

At AFS EAFI Finance Advisors, we believe that one of the key variables to consider when investing is the reversal of the demographic pyramid. In our view, in today’s world where it israther difficult to find value, it’s the companies that bear in mind the ongoing changes and that are able to cover the present and future needs of seniors, that attract our attention. Bearing in mind the investment profile of each investor, we would regard these companies as an excellent long term investment opportunity.

Disclosure: The author is not responsible for the views expressed in the article. The text was written freely expressing ideas, without receiving any compensation. The author has no business relationship with any of the companies whose shares are listed in this article.

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