By 2030, the number of centenarians worldwide will exceed 1 million! Morgan Stanley: Aging population is good for the stock market

In the science fiction novel, "Living to a Hundred Years Old" is becoming a reality, and the era of aging has arrived...

Recently, Morgan Stanley analyst Paul Walsh released a report stating that by 2030, the total number of centenarians in five geographic regions globally will reach 1 million, while three regions will lose about 75 million labor force aged 25 to 69, and by 2060, the dependency ratio (the ratio of population aged 65 and above to working-age population) in most G20 countries is expected to at least double.

The analysis points out that changes in population structure are impacting employment and pension plans, prompting governments around the world to take measures to alleviate potential obstacles to GDP growth. In addition, as the challenges of an aging population escalate, a new opportunity arises in the era of aging. Morgan Stanley stated that as the best-performing theme among the three key themes influencing global stock market volatility, the longevity theme has already driven and is expected to continue to drive major stock market trends in the coming years.

Challenges of Aging Population Severe, Policy Effects May Take 15 Years to Show

Data shows that by 2040, the working-age population in Europe is expected to decline by 6.4%. Chief European economist Jens Eisenschmidt and analysts estimate that this will lead to an average annual decrease of 0.25% in Eurozone GDP between 2025 and 2040, totaling over 4% by 2040. Without any policy action, this could reduce long-term profit growth rates for businesses from 5.1% to 4.2%.

Not only Europe, but Japan and South Korea are also facing the challenges of an aging population, with both governments implementing policies to directly address the issues of longevity and declining birth rates.

Morgan Stanley pointed out that the most direct solution to these issues is to increase birth rates, but even if this solution takes effect immediately, it will take over 15 years to have a substantial impact on the labor force.

In addition, Morgan Stanley also analyzed three policy scenarios, showing that offsetting the resistance to economic growth is entirely possible:

Narrowing the gender gap in labor force participation could boost Eurozone GDP by around 2.5% by 2040;

For each additional standard deviation in net migration, GDP could increase by 1.8%;

Increasing the retirement age by one year could potentially increase GDP by 1.3%.

Morgan Stanley stated that although these models are not perfect and adoption at the corporate level is gradual, the development direction is clear:

"We are in the early stages of a new long-term technological transformation."

Opportunities in the Era of Aging: Longevity Theme Strategic Investment

Morgan Stanley pointed out that currently, technology diffusion, decarbonization, and longevity are three key themes influencing global stock market volatility.

Analysts used the three "20" principles, namely each stock "must have over 20% of revenue coming from a particular theme, market value must exceed $200 billion, and the expected revenue growth + EBITDA margin for the 2026 fiscal year must exceed 20%", to select stocks that meet the requirements from each theme Data shows that among the selected stocks, the 5-year and 10-year Sharpe ratios of longevity-themed stocks are superior to the MSCI World Index and the S&P 500 Index, and outperform the 20 key stocks selected from the technology diffusion and decarbonization themes.

As the best-performing theme among the three key themes, analysts state that the longevity theme has already driven and is expected to continue to drive the major stock market trends in the coming years.

Since the beginning of 2023, the absolute value of these 20 stocks has grown by 57%, adding approximately USD 864 billion in market capitalization, outperforming the MSCI World Index by 18 percentage points.

Furthermore, in the book "Unlocking Longevity: Retirement in an Aging Society," authors Betsy Graseck, Mike Cyprys, Bruce Hamilton, etc., state:

"Current income from asset and wealth management is around USD 1 trillion, and in our base scenario, it is expected to increase to USD 1.4 trillion by 2028, with much of it related to retirement and longevity. Of course, a reasonable bull market scenario of USD 1.8 trillion is also possible."