Today I am at SMU, up here in Dallas. I was invited to a Texas Business Hall of Fame event. It’s a good time to reflect on the chronic need for young college kids coming out of school today.
When we talk about college grads, there’s a lot of people who are coming out with underwater basket weaving degrees. But far more important to the economy at large are people coming out with real hard skills, real hard degrees. There are many jobs for every single one of these candidates, and it’s just a microcosm of a bigger challenge within the economy.
This is important, because in 2024, we’re hitting what demographers called Peak65 for the baby boomers. In 2024, at least half of the baby boomers will be 65 years or older. They are leaving the workforce at greater and greater numbers. There aren’t enough young people coming in at the back end. That’s going to create enormous challenges for employers moving forward. There are supply chain challenges, but hiring talent is the number one challenge in the US economy, in a world where we need tax revenues to pay for the care and feeding of those baby boomers as they continue to age out of the process.
Universities are only a small part of the problem. Community colleges, all the other resources that are available are important. But what does that mean for the investor? It makes it difficult to see a scenario where long-term interest rates are coming down significantly anytime in the future. The economy is running on all eight cylinders. The need for workers is pretty significant. Unemployment is below 4%. How on earth does the Fed lower interest rates in an environment like that? And even if they do lower them in the short-term, how do they come down that far in the long-term, as we have increasing needs on the capital, on the federal purse in the next couple of decades?
For those who would argue that these moderated interest rates are actually a good thing for the economy, they are getting rid of the zombie companies. But this uncertainty, the geopolitical uncertainty, the new level of interest rates, the supply chain shortages coupled with labor shortages are all leading investors to wonder, is this market about as expensive as it’s going to get? As asset allocators, we would say, “Let’s not time markets.” But we aren’t going to be ignorant of market valuations. If you have any additional questions, please feel free to reach me or any of my partners. We wish you the best of investing success. Thank you.
Paul is the founder and CEO of Avion Wealth, LLC. He leads a team of wealth managers in building and executing financial plans for high net worth individuals and families. Contact Avion Wealth to speak with a financial advisor.
