To Our Investors and Friends,
The S&P 500 ended the month of July up 1.1% as investors began to take profits in the Magnificent Seven (Apple, Microsoft, Nvidia, Meta Platforms, Amazon, Google, and Tesla) to invest in other neglected parts of the market. The 10-year Treasury Bond fell in the month to 4.09%, a 27-basis point decline from June as inflation continued to moderate. The 2-year Treasury ended the month 22 basis points lower to end at 4.29%. Oil drifted lower, ending the month down more than 5% to $78 a barrel. The Russell 2000 Value Index advanced 12.2%, the Russell 2000 Growth Index increased 8.2%, and the Russell 1000 Value Index expanded 5.1% in the month. The profit taking on the Magnificent Seven led to a 1.7% decline in the Russell 1000 Growth Index.
The stock market is not the only place where there has been a significant change in leadership. After a poor debate performance, and with the encouragement of his fellow party leaders, President Joe Biden announced he would no longer seek re-election to the most powerful position on the planet. Although he didn’t explicitly say it was because of his advanced years, we can be confident that it was a primary factor. It is clear Biden’s age has generated much conversation and debate about older Americans and forces us to consider how aging is changing the world in new ways.
Andrew Scott, author of The Longevity Imperative, states that “Aging doesn’t start at 65. Aging occurs at different speeds for different people, leaving the task of defining old age impossible.” As can be seen in the chart below, humanity has done a terrific job materially reducing infant mortality and finding cures for those diseases that shortened life, allowing people in developed countries to live well into their 70s and 80s. In fact, Scott claims that a child born in the United States today has a 50% chance of reaching 95 years old.
As the world gets older, society is changing in unanticipated ways. What used to be a population structure resembling a pyramid with many young at the bottom and fewer old at the top is becoming much more inverted across the ages. This means that older Americans wield greater political and economic power, while younger Americans are no longer able to support the long retirements and healthcare expenses of their elders. Society will have to adapt to this new reality by changing both the current healthcare system, and by developing what Scott calls an “economic longevity dividend” - an economic benefit derived from an older working population.
Scott explains, “A healthcare system that brilliantly supported the first healthcare revolution is not set up to achieve the second and is unsustainable. The second longevity revolution will need more than just a new health system, it will also require scientific progress and medical breakthroughs that help us age better.” To achieve this, the 1% of total healthcare costs currently spent on preventative care will need to increase considerably.
An economic longevity dividend can be accomplished by rethinking retirement and rejecting agism. We are on our way to doing just that. Scott explains that “over the last ten years, workers over 50 accounted for the majority of employment growth in the world’s richest nations.” In fact, according to social entrepreneur Mark Friedman “old people are the only natural resource that is increasing in the world.”
At Kingsland Investments, we spend a considerable amount of time studying how the economy will change in the future and then determine the likely beneficiaries in the stock market. Those companies that embrace significant trends, such as the impact of an aging population, set themselves up for a brighter future. Investors can do the same, preparing for a significantly longer retirement by appropriately investing in the great growth companies of the future.
All the best to you,
Arthur K. Weise, CFA