Economy

Which Companies Will Suffer as the US Population Ages?

24/7 Wall St. Staff

Published: March 28, 2016 7:35 am

Last Updated: January 13, 2020 11:29 am

America is aging. At last count, the percentage of the U.S. population age 65 and over was 14.1%, or just shy of 45 million individuals. By 2050, estimates put this figure at 21.7% for a 54% increase across the period. By 2060, there will be close to 100 million U.S. people over 65. This sort of shift will have an impact on the dynamics of the U.S. economy and its macro components: Social Security, workforce and taxation, to name a few.

There’s also a microeconomic impact of an aging population, one that affects certain industries and their constituent companies. Over the next 40 years, some stocks should do very well in the wake of a demographic shift. Some, not so much. Here are some industries and companies that could be set to take a hit as the U.S. population ages.

First, the health insurance space. As a population ages, its need for health care increases. Yes, some of the cost will be borne by the government via whatever public programs are available at the mid-point of this century, but private health insurance companies will have to foot a large portion of the bill. This is a twofold hit. First, the more elderly individuals, the more treatments, surgeries and care insurance companies will have to cover. Second, as the population ages, improvements in health care should lead to longer life. Some experts suggest the first person to live to 150 has already been born. This will lead to a more prolonged period of increased payouts. Any or all of the big five health insurers in the United States, UnitedHealth Group Inc. (NYSE: UNH), Cigna Corp. (NYSE: CI), Humana Inc. (NYSE: HUM), Aetna Inc. (NYSE: AET) and Anthem Inc. (NYSE: ANTM), look set to suffer.

Next, retail. Specifically, discretionary retail, or luxury items. As today’s workforce shifts into retirement, its combined income will effectively halve. Without an expanding younger generation to makeup the shortfall, dollars spent on things like cars, clothing (retirees spend less on clothing) and restaurant (retirees eat out less, and for less, than the working adult population) meals will decline. Companies set to suffer the fallout from this contraction in dollar spending are General Motors Co. (NYSE: GM), Macy’s Inc. (NYSE: M) and Darden Restaurants Inc. (NYSE: DRI) among others.

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