The M/Y Ratio is favorable for stocks

[dan_s]

Are You Familiar with the Prophetic M/Y Ratio?
You should be. It'll get your investing juices flowing…

The M/Y Ratio is simply the number of middle-aged people (35- to 49-year-olds) divided by the number of young adults (18-to-34s).

When the M/Y Ratio favors the middle-age group (M), as opposed to the younger generation (Y), the stock market thrives. How come? Because the middle-aged invest…and the young typically do not.

For example: At the end of the bullish 1960s, the M/Y Ratio peaked at 103 – then plunged to 62 as the huge Baby Boom generation entered their 20s. Suddenly, the young outnumbered the middle-aged, and the 1970s bear market commenced.

The 1980s began and everything changed as tens of millions of Boomers crossed into their prosperous 30s and 40s. The Great Reagan-Clinton Bull Market roared for 20 years, until 2000. The M/Y Ratio crested at 109 and fell as the oldest Boomers began to withdraw money from the stock market. Simultaneously, the Millennials entered their 20s with few jobs, little money and big student debts. The M/Y Ratio plummeted 15%. From 2000 to 2010, the S&P 500 lost 24%.

Today's demographic climate looks like that of the early 1980s. The leading wave of the Millennials, the largest generation in U.S. history, has turned 34, the start of high-earning middle age. The M/Y Ratio is back up to 94 – and rising. As the economy picks up, look for Millennials to pour their money into stocks, real estate and retirement plans, just as their parents did. It's an M/Y Ratio dream scenario.