There are some factors that might soften the impact of population decline. We’ll likely see more investment in individual workers, and workplaces will adapt to attract semi-retired workers, parents, and people with different needs or backgrounds.
But overall, I agree that it will likely reduce future earnings for developed nations’ stock markets.
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The US will likely rely on immigration to counter the decline in birth rates worldwide. I’m personally not betting on international stocks. If you’re confident, though, you can go all-in on a VXUS portfolio.
I don’t think depopulation is a reason to avoid international stocks completely, but it might require a more selective asset allocation strategy.
For example, you might want to avoid sectors tied to domestic demand (like FTSE 250 companies in the UK) and focus more on global companies (like FTSE 100 stocks). You might also want to reconsider government bonds if a shrinking population affects the tax base.
That said, a passive investment strategy will likely account for these shifts over time. And countries like the UK may be able to slow population decline through immigration.
South Asia also has a lot of growth potential, so I wouldn’t want to cut out exposure there.
It’s relevant for a single country, but in the global context, immigration is a zero-sum game. It just moves people around, but it doesn’t change the overall population decline.