Remember the yuppie/ nerd ratio? A client reminded us of it at a meeting last week. It is the ratio of 25- to34-year olds ('yuppies') to 45- to 54-year olds ('nerds') and was made popular as the baby boomers moved through these two demographic phases. As they formed households, hitting their peak spending years, inflation surged and interest rates consequently rose. Demographers attribute some of that inflation to the spending power of the group bidding up prices. The peaks in bond yields coincided with the boomers entering their maximum earnings and investing years - the nerd phase (see chart below). A small resurgence of 25- to 34-year olds - the echo boomers - over the next ten years might imply higher yields. However, with the boomers moving from high-earning savers to retirees needing investment income, we believe the yuppie/nerd ration is becoming less relevant (see chart on page 2).

David Fuller's view I recommend that you read on because The Weekly View makes an interesting point about boomers usually overpaying for everything.

If boomers do pay up for yield, this should have positive long-term benefits for the stock market. How? Well, it would encourage companies to increase dividends when sensibly possible. In turn, this would attract more boomers and other investors back to the stock market.