- As consumers drive the US economy, we’re in “boomer nation,” a hedge fund manager said.
- Tourism, healthcare, and biotech are areas investors should focus on in the “boomer renaissance.”
- “A lot will be determined in terms of the consumer, that’s who is leading the charge.”
They have a lot of cash to spend, they don’t have expensive mortgages, or maybe even no mortgage at all, and they make up a huge chunk of US stock owners.
They’re the baby boomers.
And with consumers driving the US economy, it’s worth paying attention to how the older generation is spending their wealth, a hedge fund manager said. In a CNBC interview on Wednesday, David Neuhauser of Livermore Partners said you need to look at the boomers to see where the stock market rally is broadening out to.
“A lot will be determined in terms of the consumer, that’s who is leading the charge,” he said. “It’s the boomer nation. The boomers that are spending money, that have wealth, that are tied to fixed-rate mortgages. As long as that continues the markets could continue to do well.”
According to Neuhauser, there are three pockets of the market where investors can cash in on the “boomer renaissance.”
First, there’s tourism. The sector has done well in the past few years, especially the cruise industry. Boomers have more leisure time than other generations, and they like to spend on travel and entertainment. Bank of America analysts previously said travel was cited as the top priority for discretionary spending among the 50+ age group, according to AARP data.
Boomers also spend more money on healthcare, and the generation spends more on things like personal care services and care facilities like senior homes.
Finally, there’s biotech. Boomers are older and spend more money on medicines. That money pours into the coffers of big pharmaceuticals. And with those fattened wallets, there are more biotech companies that can become catnip for potential buyouts or mergers.
And although biotech hasn’t returned to the boom days of 2021, which saw a flurry of IPOs in the sector, it could be posed for a new rally, Neuhausser said.
“If you look at a chart over the last five to seven years, [biotech] looks like it could be potentially breaking out,” he said.
The sector, after sliding into a post-COVID slump, has been pressured by high interest rates and high inflation, but the tides may be turning. Neuhauser said that pharma companies, flush with cash from an aging population, are buying smaller biotech companies at earlier stages in their drug trials to profit from early successes.
“In the past they would wait till the late stages, and now it seems like if you have some really initial results, why not have that option value if you’re a large pharma,” he said.
