The Viewpoint: What declining birth rates mean for society and stock markets

If you are anything like me you have probably been reading about ‘Peak Oil’ for years. I started my career many years ago and we were talking about it back then. The date just gets pushed out further and further. But what about ‘Peak Population’?

The media are full of stories about immigration, overcrowding and the drain on the public purse – it is an emotive subject, which is changing voting patterns and will likely shape government policy for years to come. However, we also read plenty about declining birth rates across much of the world and the problems this may cause in the medium to long term.

Peak Oil is tricky: there are so many variables to consider when predicting supply and demand (alternative energy, government policy, consumer behaviour to name but a few). But population dynamics are a little easier to predict. In the simplest terms they are governed by births and deaths, both of which are relatively predictable.

What does this mean for society?

Across the developed world, birth rates are falling, and fast. While this shift has been underway for decades, in recent years the trend has accelerated. The general consensus is that we will reach peak population somewhere between 2080 and 2090 and decline from there. This quiet demographic revolution may lack the drama of a market crash or a Trump tweet, but it will likely have profound implications for society, economic growth, and the companies in which we invest, for decades to come.  

In 1960, women in developed countries had an average of 3.3 children. By 2022, that figure had fallen to just 1.5 which is well below the “replacement rate” of 2.1 children per woman needed to maintain a stable population. The United Kingdom’s fertility rate fell to just 1.44 in 2023, while the United States saw its lowest ever figure: 1.66. Europe as a whole averages around 1.5, with countries like Spain and Italy even lower. For now, sub-Saharan Africa is the outlier, with an average fertility rate above four, but even in many African nations, the trend is downward. A recent Lancet study projected that by the end of this century, c. 95% of countries will have fertility rates below replacement levels [1] [2] [3] [4] [5].

These statistics are more than just academic. When births fall below replacement and stay there, population aging follows. Fewer young people enter the workforce, while the share of older, economically dependent citizens grows. This change increases the so-called ‘dependency ratio’, placing strain on pension systems, healthcare infrastructure, and public finances. The UK recently experienced a historic milestone: in the 12 months to mid-2023, there were more deaths than births, which is a first outside the context of a pandemic or wartime. That simple data point is a signpost of larger societal change [3].

At the most basic level, fewer people equals less consumption. Retail spending, housing demand, and even infrastructure requirements all respond to the size and age of the population. Moreover, a smaller working-age population can constrain innovation and economic dynamism, especially in industries that rely on youthful energy, entrepreneurship, and risk-taking.

Several countries have attempted to buck the trend through policy. France has historically maintained one of the higher fertility rates in Europe thanks to generous family policies. These include subsidised childcare, lengthy parental leave, and even a family-based income tax system that supports larger households. Scandinavian countries like Sweden and Norway have also fared relatively well, offering comprehensive parental leave schemes, flexible working hours, and extensive early-years support. While none of these countries has fully reversed the demographic decline, they have at least managed to slow it.

In contrast, South Korea, despite a raft of financial incentives for young parents, now has one of the lowest fertility rates in the world, at just 0.78 [6]. This underscores a growing consensus among demographers: money alone isn’t enough. While cash handouts, baby bonuses, or tax relief may temporarily boost birth rates, they often fail to address deeper societal barriers to family formation. High housing costs, inflexible work arrangements, expensive childcare, and broader shifts in gender roles and aspirations all play a role.

In the UK specifically, it is estimated that by 2050 over a quarter of the population will be 65 or older [7]. An already strained NHS will feel that considerably and will have to increasingly shift its services towards geriatric, dementia and palliative care over maternity and paediatrics and labour shortages could hit the healthcare sector particularly hard. Imagine in rural areas, as local populations shrink, what does that mean for house prices? For schools already struggling to fill their classrooms? For the vibrancy of small town centres?

What does all of this mean for equity investors?

First, we must recognise that slower population growth implies slower economic growth, at least in mature economies. GDP growth is a function of labour force expansion and productivity gains. If the former turns negative, the burden shifts entirely to the latter. That could be good news for companies offering productivity-enhancing technologies, from enterprise software to automation to AI, but it places pressure on traditional consumer and manufacturing sectors.

GDP growth is a function of labour force expansion and productivity gains. If the former turns negative, the burden shifts entirely to the latter.

Second, as older populations come to dominate many western economies, the structure of consumption will change. Investors should expect to see rising demand for healthcare, retirement planning, assisted living, and age-friendly technology. At the same time, education providers, childcare services, and youth-oriented brands may find growth harder to come by in saturated or shrinking markets.

Capital markets themselves may evolve. Retirees tend to be more conservative, favouring income over growth and stability over speculation. This could shift capital flows toward dividend-paying equities, fixed income, and infrastructure, and away from more volatile asset classes. As a result, markets may become more yield sensitive and less risk tolerant. Investment products will need to evolve alongside these trends.

Despite the current news headlines, immigration may become an increasingly vital tool for mitigating demographic decline. Countries that maintain relatively open and well-managed immigration systems could outperform those that do not. The US, with its history of immigration, was, perhaps, better positioned than much of Europe or East Asia although somewhat ironically the political sentiment across large parts of the world, including the US, has shifted towards closing the borders. Emerging markets with more favourable demographics, particularly in Africa and South Asia, may also gain increased attention from global investors seeking growth.

There are plenty of companies set to benefit directly from this trend. Aging populations create demand for products such as healthcare, pharmaceuticals, and retirement services. However, it will reduce demand for others, such as housing for families or consumer goods targeted at young adults. Sectors that benefit from demographic tailwinds, such as robotics and automation (which can help offset labour shortages), may see rising valuations. Meanwhile, companies heavily reliant on a young and growing customer base could struggle to maintain growth.

Aging populations create demand for products such as healthcare, pharmaceuticals, and retirement services.

Certain types of companies may be more attractive in this environment. AstraZeneca (Compounder) is a example of a company skewed towards an older customer with its portfolio and pipeline of cardiovascular, oncology and respiratory products. Think of St James’s Place (Compounder) and how it aims to help with pension advice and inheritance planning or Saga with travel, insurance and financial services targeted specifically at the over 50s. Other UK companies will have no choice but to adapt their business models to avoid stagnation or decline.

Demographic risk is now an essential part of long-term investment thinking. Whether you’re looking at the future of retail, housing, education, or consumer finance, the age structure of the customer base matters. Investors must factor in not just what companies sell, but who they are selling to, and whether those customers are growing in number or declining.

[1] SF-2-1-Fertility-rates

[2] World Birth & Fertility rates decline by country (1960-2023)

[3] Fertility rate in England and Wales fell to a record low in 2023 | The BMJ

[4] https://www.macrotrends.net/global-metrics/countries/ssf/sub-saharan-africa/fertility-rate

[5] The Lancet: Dramatic declines in global fertility rates set to transform global population patterns by 2100 | Institute for Health Metrics and Evaluation

[6] Korea to expand baby bonuses, housing support to fight world's lowest fertility rate - The Korea Times

[7] United Kingdom: Aging - World Health Systems Facts

For professional investors only. This material is not suitable for a retail audience. Capital at risk. This is a financial promotion and is not investment advice. Past performance is not a guide to future performance. The value of investments and any income from them may go down as well as up and is not guaranteed. Investors may not get back the amount invested. Portfolio characteristics and holdings are subject to change without notice. The views expressed are those of the author at the date of publication unless otherwise indicated, which are subject to change, and is not investment advice.