NEW YORK (CNN) – America's population is aging and thousands of people have fewer children than older generations did. It is a risk to the US economy that does not receive so much attention to interest rates, trade wars and corporate earnings.
The long-term risk of slowing down population growth "poses particular economic challenges," said David Kelly, Chief Global Strategist with JPMorgan Funds, in a recent report. He is concerned that politicians do not solve the problem, which can damage the market, especially if some of Trump's proposed plans for "merit-based immigration" and increased border security are adopted.
Kelly will talk about this as well as Other factors affecting the markets and the global economy, with CNN Business Editor-at-Big Richard Quest on "Markets Now" live show Wednesday at 1
Kelly said the combination of retirees and lack of working age Americans is creating a problem that "is particularly awkward for the economy." He added that this trend should "continue throughout the 2020s."
Therefore, Kelly recommends that the United States "should probably have a serious conversation to temporarily increase, rather than reduce immigration, at least while the baby boom retires."
"This would allow us to provide economy with extra workers to match the inevitably rising number of dependents, "he said.
Kelly noted that there are many other issues that the US has to deal with because of these demographic changes – another reason why the government "should work to reduce both trade barriers and the dollar level to help US companies get access to faster growing markets abroad. "
Investors in the US need to prepare for earnings growth slows, bond yields continue to decline, and overall returns are lower, Kelly says. And he thinks that demographic trends will hurt the job market.
"Home-building and auto sales will not be the boom industry, they have typically been in a strong economy earlier," Kelly said, adding that "there will be an ever-increasing spread of AI and robotics in the economy to compensate for the lack of Employees. "
Therefore, Kelly believes that a common vanilla strategy for strong US growth betting will generally yield disappointing results." He claims investors should "exploit faster growth abroad, especially in emerging markets facing less demographic challenges. "
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