Independent Financial Research & Analysis
Daily briefings, 7,300+ real-time charts, and macro insights from Dr. Ed Yardeni and his research team.
Research
Latest Research
Recent insights from our research team
On AI’s Complex Pricing, South Korea’s Good Fortune, And S&P 500 NERIs
Pricing for AI services is becoming increasingly complex as AI becomes increasingly agentic. That takes much more computational power than fetching answers. Melissa discusses how AI pricing works, surmising that the winning AI providers won’t be those with the smartest models but those that use “tokens” the most cost effectively. … Also: William discusses the vulnerability of the South Korean stock market and economy. They’ve been soaring on the wings of AI with little underlying broad support. … And: Joe shares his takeaways from updates of our Net Earnings Revisions Index and Net Revenues Revisions Index.
Retiring Baby Boomers & The G-Shaped Economy
Many economists continue to question the resilience of consumer spending in the US. The naysayers don't believe it's sustainable and continue to expect significant consumer retrenchment. They claim that the economy is "K-shaped," with the wealthiest 10% of households accounting for 50% of all retail spending. Those widely quoted numbers are from Moody's Chief Economist Mark Zandi. They make no sense to us. We don't doubt that the growth of high-income households' spending has been faster than that of low- and middle-income households over the past couple of years. The former has certainly been boosted by a very positive wealth effect from the stock market. The latter undoubtedly slowed over the past couple of years once consumers spent all the government-provided pandemic support checks. But there is no way that 10% of households account for 50% of consumer spending. Just go to Costco or your local mall to see what we mean. Our alternative is the "G-shaped" economy, in which older Americans, who tend to be among the wealthiest households, provide financial support to their younger adult children and grandchildren. In our opinion, much of the affordability crisis in America today is affecting younger generations, while the older generation of Baby Boomers is helping them cope with it. This explains the resilience of consumer spending and suggests that it can continue. Let's have a close look at the data that, on balance, support our relatively optimistic viewpoint: (1) Retiring Baby Boomers earn less and continue to spend. The alarmists are alarmed that real disposable income (DPI) has been flattening in recent months (chart). They say that real consumer spending cannot continue to rise to record highs as it has so far. We attribute the real DPI flattening largely to the retirement of Baby Boomers. As more of them do so, they no longer earn paychecks. That is weighing on real DPI because they tend to earn more than younger workers. They are drawing on their retirement funds to support their spending. Just for fun, let's assume that real DPI remains flat over the next several years and that real consumer spending continues its current upward trend. If so, then real consumption will start to exceed real DPI around 2030. In this scenario, the personal saving rate will then turn negative if and when that happens. (2) Baby Boom retirement wave is underway. Social Security data confirm that the Baby Boomers are retiring at a faster pace (chart). In 2025, a record 1.85 million additional retired workers received Social Security benefits. That pushed the total to a record high of 53.6 million retired workers receiving Social Security benefits (chart). Retired workers now account for a record 19.5% of the civilian working-age population (chart). The labor force participation rate for those aged 65 and older has been declining since COVID (chart). Most strikingly, the share of persons aged 65 and older who are not in the labor force (NILF) reached 50% of all NILFs in April (chart). That's because there are more retired Baby Boomers, and they are living longer. Half of those outside the labor force are now Baby Boomers, who are relatively well off. That is an unprecedented demographic shift with profound economic consequences. (3) Consequences of the retirement wave. Again, as millions of highly experienced workers retire during their peak earning years, they transition from highly paid jobs to relatively fixed retirement incomes. This obviously weighs on the average growth rate of total income, not because the economy is weakening, but because of a shift in demographic composition. This development also causes the personal saving rate to decline, as retirees draw down their accumulated wealth to support their spending (chart). They certainly aren't saving out of labor income anymore. The Baby Boomers have a record $89.6 trillion in household net worth, making them by far the wealthiest generation in history (chart). Baby Boomers don't stop spending when they retire. (4) How retired Baby Boomers spend their time and money. For the wealthiest generation in history, retirement means more time for spending on goods and services. The spending data already confirm that Baby Boomers are actively driving consumption growth across major categories. They are spending heavily on fun-related activities, including gambling, recreation services, spectator amusements, and amusement parks. The sum of all these rose to a record high in March (chart). The retirees are traveling more, providing a key tailwind to air transportation, hotels, and related travel services (chart). They spend more time at home. So housing-related spending is rising to record highs (chart). And when they are not at home or traveling, many are at restaurants, helping to explain why S&P 500 restaurant forward revenues per share remain on a strong upward trajectory (chart). Baby Boomers are getting older, with life expectancy continuing to rise. As they age, they need more medical attention, which is why employment in the health care and social services industries has risen to a record high and has been by far the largest source of job growth in the economy over the past several years (chart). (5) The G-Shaped economy. In our view, today's economy is not K-shaped but rather G-shaped. While Baby Boomers are thriving, younger generations are confronting an affordability crisis. Over 70% of Gen Z and Millennials report borrowing from family members to cover basic needs. The US now has more single adults than married adults, and one in three Americans aged 18 to 34 lives in their parents' home (chart). But this is precisely where the generational story comes full circle. Baby Boomers are not just spending their own wealth; they are also transferring a significant portion of it to the younger generations who are struggling. Those transfers help provide a floor to aggregate consumption from below even as spending by Baby Boomers drives it from above.
On China’s Lagging Stock Market & An AI Chokepoint
Investors in China’s stock market ran for the exits at news that regulators would be cracking down on stocks driven by AI euphoria versus earnings potential. Fanning the fear, William explains, were the implications that China’s President Xi isn’t the capitalist proponent of free markets he claims to be. … Also: Toby discusses the China MSCI’s extremely low valuation for profitable companies. While that sounds enticing, share prices reflect risk that isn’t likely to go away. … And: The Strait of Hormuz isn’t a chokepoint only for oil. Some 20% of global internet and financial data run through it via subsea cables. Threats to tax that flow have Big Tech brainstorming Hormuz-avoidance strategies.
Archive
Our Research Library
19 years of daily research, charts, and analysis
Topics
QuickTakes Topics
Timely commentary covering the most important market themes
Charts
Find Any Chart in Seconds
Search across 7,365+ real-time charts with instant visual previews
TARGET: PRICE, FORWARD EARNINGS & VALUATION
LOWE'S: STOCK PRICE INDEX, EARNINGS & P/E
LOWE'S: FORWARD LTEG, STRG & STEG
TARGET: FORWARD P/E
Sample charts from our collection of 7,365+ visualizations
Tools
Research Tools
Interactive dashboards for tracking economic conditions and market trends
Beige Book Monitor
Fed economic conditions across 12 districts with traffic-light signals.
FOMC Policy Meter
Dovish-to-hawkish policy stance tracker across FOMC meetings.
FOMC Minutes Monitor
Hawk/dove signal extraction across 10 economic themes.
FOMC SEP Monitor
Fed projections and dot plot distributions across meetings.
Private Credit Monitor
Auto-updating chronology of the private credit liquidity crisis.
Release Calendar
Major publications from the Fed, ECB, IMF, and 12 global institutions.
Try Yardeni Research free for four weeks.
Full access to everything we publish. No credit card, no obligation.