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What a Pandemic Baby Boom Could Mean for Investors

Don't worry about last year's decline in the birth rate. Even if there's a pandemic-related baby boom, its impact on the U.S. stock market won’t be felt for years.

A new baby boom could be in our country’s future. But we won’t know until later this year at the earliest.

That’s worth remembering because many Wall Street analysts who focus on birth rates and demographic trends are making a big deal out of what they’re calling last year’s “baby bust.” They’re referring to the unexpected decline in the U.S. birth rate, which occurred despite the belief that the work-from-home movement would lead to a jump in pregnancies.

That didn’t happen, and the consequences of the unexpected decline only began showing up in the birth rate data a couple of months ago — nine months after the pandemic began. That time lag is worth remembering because, if pregnancy rates are starting to turn back up, we wouldn’t necessarily know it until the beginning of next year at the earliest.

I only have anecdotal evidence of such an increase, but it is certainly suggestive. Consider the following table, which lists several pregnancy-related search terms — along with the week since the beginning of last year in which Google searches using that term reached their peak.

(For those of you who don’t know: What to Expect When You're Expecting is probably the most widely read book by soon-to-be parents. The publishers claim it’s read by more than 90% of pregnant women who read a pregnancy book.)

Search TermWeek since Jan. 1 2020 of greatest number of searches based on term

Pregnancy tests

Feb. 21-27, 2021


Dec. 27, 2020 to Jan. 2, 2021


March 14-21, 2021

What To Expect When You’re Expecting

Jan. 3-9, 2021

Another intriguing straw in the wind is an email I recently received from an economist on Wall Street who wrote: “I sense that there’s been a baby boom among my co-workers and clients. One said that their doctor was also seeing a boom.”

I mention all this to caution you against jumping to bearish conclusions from the declining U.S. birth rate that is just now showing up in the data. Though we don’t know if the situation is improving, we do know that, if it is, we still won’t know about it for a number of more months.

The MY Ratio

But there’s an even more fundamental reason not to become too alarmed by last year’s unexpectedly low birth rate: Even if the birth rate never fully recovers, its impact on the U.S. stock market won’t be felt for many years.

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Consider the demographic indicator that researchers have found to be best correlated with the stock market’s long-term return: The so-called Middle-Young (MY) Ratio, which is calculated by dividing the size of middle-aged cohort (ages 35-49) by the size of the young cohort (ages 20-34). Those interested in reading more about the theory underlying the MY Ratio should read one of the first academic studies on the subject: “Demography and the Long-Run Predictability of the Stock Market,” by John Geanakoplos of Yale University, Michael Magill of the University of Southern California, and Martine Quinzii of the University of California at Davis.

The accompanying chart plots this MY Ratio along with the inflation-adjusted S&P 500 since 1900. Though this ratio is by no means a short-term market timing indicator, notice that it is broadly correlated with shifts in the stock market’s long-term trend. Fortunately for that trend, the MY Ratio will be rising until the mid-2030s.

Hulbert Chart 040621

Notice also from the chart the earliest possible point at which last year’s so-called baby “bust” could impact the MY Ratio. That would be in 2040, which is the first year in which births in 2020 would impact the size of the 20-34 age cohort (the “Y” in the “MY Ratio”).

Ironically, its impact beginning in 2040 will be to increase the MY Ratio. That’s because, as the denominator of the ratio gets smaller, the value of the overall ratio increases.

Latest From the Social Security Administration

I would be remiss, when discussing the pandemic’s impact on the birth rate, if I didn’t mention the latest projections from the Social Security Administration (SSA). Birth rates have an outsized influence on the long-term solvency of the Social Security trust fund, so their actuaries pay close attention to even tiny changes in fertility.

The table below shows what the SSA actuaries were projecting for the U.S. birth rate before the pandemic began, as well as from their most recent update. The number in each cell is that year’s projected “Total Fertility Rate” (TFR), which refers to the average number of children that would be born to a woman over her lifetime. To put the numbers in context, a TFR of 2.1 is considered the minimum level to prevent the population from declining over time.


Pre-pandemic projection







Most recent projection







Notice that, relative to its pre-pandemic projection, the SSA is now assuming the TFR will be lower through the end of next year, but then be above for the next three years. By 2026 the TFR is projected to be back to where it would have been if the pandemic had never happened.