Demographics Favor Emerging Markets, India Leads the Pack

Bill Gross believes that demographics haven’t influenced the world economy yet. He gave the example of Japan (EWJ), Italy (EWI), and Taiwan where the populations are aging faster than other countries. According to the Central Intelligence Agency’s 2015 estimate, the median age in these countries stands at 46.5 years, 44.8 years, and 39.7 years—compared to the median age for developing nations like Brazil (EWZ), India (EPI), and Mexico (EWW). In these countries, the median age is 31.1 years, 27.3 years, and 27.6 years, respectively.

Demographics could start creating a divide between the developed and the developing (EEM) (VWO) world. The developed world is struggling to meet growth targets due to a larger proportion of retirees depending on earnings and the productive capacity of a smaller working population. Gross thinks that it could reach a point where it seems like a race between developed and emerging markets.

Aging demographics lead economies to a situation of a rising debt burden if it isn’t accompanied by an equal rise in the working-age population and productivity. This phenomenon has been prominent in Japan, Italy, and Taiwan. Even China joined the league. Its one-child policy proved to be a bane rather than a boon to economic health and prosperity.

If you think that Greece and Puerto Rico’s excessive debt led to the crisis situation in both of these countries, you haven’t seen enough. In his January investment outlook, Bill Gross highlighted a fact about the US economy that will give any long-term investor goosebumps.