5 Big Demographic Disruptions That Could Shake Portfolios

There are now a number of disruptive factors that could topple normal economic and financial conditions, increasing the need for ETF investors to take a more diversified approach when crafting a well-rounded investment portfolio.

According to State Street Global Advisors, there are five big demographic disruptions that could shake our foundation, including a so-called time bomb, unsustainable pressures on national budgets, demographic dividend in emerging markets, mass migration in a globalized world and behavioral differences between generations.

“Without this appreciation of how demographic forces are disrupting our world and how we should respond, investment opportunities may be missed and longer term risks may become acute,” State Street Global Advisors said in a note.

The demographic time bomb refers to the combination of big increase in life expectancy due to advancements in healthcare with dramatic drops in fertility rates. As the working population growth falls and available labor force shrinks, GDP growth diminishes.

The sustainable pressure on national budgets touches upon the growing debt among advanced countries, especially with an aging population that is taking up a greater amount of age-related expenditures.

While the demographic dividend in emerging markets paints a picture of a growing number of young people in developing economies, they are not enough for the developing markets to grow as reforms like education and female participation will be required to create more jobs.

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The mass migration in a globalized world has allowed greater movement among countries, but it has also exacerbated friction between migrants and natives and fueled greater geopolitical unrest.