Post edited 11:09 pm – September 23, 2011 by somrh
This is an interesting study put out by the San Franscisco Fed:
Boomer Retirement: Headwinds for U.S. Equity Markets?
The study found that a ratio they call M/O (which is the ratio of the number of individuals aged between 40-49 to the number of individuals aged between 60-69) is a good predictor of P/E ratios for the S&P 500. The idea is that individuals aged 40-49 are in their financial prime and are accumulating assets for retirement (e.g. buying stocks) while those aged 60-69 are beginning to retire and are either selling assets or shifting to less risky assets (e.g. selling stocks.)
The expected trend of the M/O ratio (see figure 2) indicates P/E ratios for the S&P 500 may decline in the near future which would present a good opportunity to find quality assets at lower prices.
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