May 24 2024

Succession

I most probably read far too much news, I give you that. But I can’t help noticing a change of the old guard underway. Over the past weeks, two CEOs of the largest banks in the US, Jamie Dimon at JP Morgan and James Gorman at Morgan Stanley, announced their retirement. In my mind, it added up to the obituaries of Jim Simons, and Charlie Munger, respectively rockstar asset managers of Renaissance Technologies and Berkshire Hathaway, two of the masterminds of “modern” finance.

As a GenX, part of me rejoices at the opportunity for equally-bright minds to fill in the gap and lead with novel ideas. The other part is trying to gauge the tectonic changes potentially at play.

From an helicopter view, the developed world is ageing. Populous Silent and Boomer generations are being phased out of business after a long and powerful rule. By 2050, 27% of Europe and North America’s population would be over 65 years old.

The induced changes are plentiful, starting with workforce shrinkage and increased retirement, calling for more automation and technology to fill in the productivity gap. Healthcare demand will increase, with costs ballooning. Households will become more multi-generational, with caregiving a rising burden. Policy will certainly need to adapt, pushing out retirement age or altering benefits. This would in turn place more emphasis on private savings and do-it-yourself pension plans. Real estate would certainly adapt to a demand for denser urban planning, with greater focus on age-friendly features.

Nothing new to a keen observer. Starting with AI, automation is well underway. Advances in healthcare are allowing to probe the genome for break-through developments in cancer treatments, and Alzheimer. Lastly, the silver economy is booming with notable demand for leisure and experience-driven activities.

This will have global implications too. While the popular trend is toward more nationalistic retreat, and closing borders tight, the truth is that immigration has never been more needed from countries with younger populations into older ones.

From a macro standpoint, it is likely that Government will spend more to update their infrastructure to accompany those changes. National debt levels will likely stay high, which may call for “higher-for-longer” interest rates. The jury is still out on inflation, as the covid-linked shock seems to have been absorbed, and high prices become harder to shoulder for the poorer parts of the population. This week however, major US retailers raised alarms on their decreasing pricing power, and outright “deflation” has been a rising concern among companies.

Indeed, let’s not forget that while the average consumer has been surprisingly upbeat, ~40% of American adults would not be able to cover an exceptional $400 expense. Sad reality of a tale of two cities.

Needless to say that these 40% will likely not indulge in private savings for their retirement. Yet, in an encouraging sign US stock ownership has increased in a straight line over the past 10 years to 62% of the population, as per a Gallup poll. A lot more needs to be done for more equal financial access though.

Who is in the lead for the succession? The likely candidates are from GenX and Millenials generations with various aspirations. Not to bore you to death with long-winded details, I have requested ChatGPT to summarize their character traits for you. From this I requested to list the likely economic trends and their downside that such new generation of leaders is likely to promote.

New leaders & economic changes – chatGPT4o, 360 Advisory LLC

In a nutshell, the future will expectedly focus on climate, social diversity & inclusion, and globalization. Looking at the current political trends, it clearly does not appear as a slam dunk. That’s because we are currently at the pivot phase, where new generations get in place and the “old” post WWII world order is being retired. If equality is on the menu, a greater balance is needed between the haves and the have-nots if the succession plan is to be carried out successfully. Let’s collectively make sure of that. Please.

That’s all for now !

About –

360 Advisory LLC is a Boston-based RIA managing investments