In recent years, there has been much discussion about the coming retirement of the Baby Boom generation and the impact that this great demographic shift will have on society. In 2011, the leading edge of Baby Boomers, born in 1946, will turn 65, followed by about 75 million of their cohorts in the next 18 years. In this paper, Charles Jacklin, Chairman and CEO of Mellon Capital Management Corporation and Ralph Goldsticker, Managing Director of Research at Mellon Capital Management Corporation, quantify the impact this trend may have on global equity markets. Their findings include:

• Demographic change yields important information in estimating fair expected returns and constructing investment strategies.
• Stock prices are most likely to be negatively affected in countries with declining middle-age populations; the growth of the over-65 population, and their potential disinvestment, is shown to be a much smaller factor.
• From 2005 - 2015, the tailwind from demographic change is seen adding 39.8% to stock returns in Spain and 16.5% in Germany. Other major countries show more modest increases over that period. Stocks in the U.S. and Japan face a headwind of -1.7% and -8.0%, respectively, over the 10 years.
• From 2015 - 2025, the major stock markets face demographic headwinds, ranging from -24.1% in the Netherlands to -18.7% in Canada; the U.S. is seen at -17.8%. Spain and Japan are seen with tailwinds of 19.6% and 2.3%, respectively.

For more information or a hard copy please contact, please contact Ralph Goldsticker at Mellon Capital Management at 415 975-2383.

The preceding information is based upon the analysis of historical performance of various asset classes and assumptions with respect to future economic conditions. Past performance is not an indication of future results. This information is not intended to provide specific advice, recommendations or projected returns of any particular BNY Mellon Asset Management product.