If the stock market and the unemployment rate were the only measuring sticks for economic recovery after the 2008 financial debacle, some aging investors wouldn’t be concerned. The stock market has tripled in value since the recession and unemployment has been cut in half, according to James Dondero, the CEO of Highland Capital Management, the Dallas-based investment firm. Highland Capital has more than $26 billion assets under management and has offices in New York, Singapore, Sao Paulo and Seoul. But Dondero and other investors look at other indicators of economic stability before they invest their partner’s money, and one of those indicators is the financial health of the generation known as the baby boomers.
The baby boomers were born right after the end of World War II, and that generation continued through the 1950s. One in five baby boomers is experiencing what some investors call a post-crash skepticism, according to Dondero. One reason for that skepticism is the value they lost in their 401K accounts, and another reason is the deterioration of the value of their homes.
Mr. Dondero thinks those issues play an important role in the way they spend, invest and save money. More than 40 percent of them have stopped saving for retirement, and they have also been taking on more debt. Baby boomers should be investing more, not less, according to Dondero and other financial experts. The aftershocks of the recession have changed their mentality when it comes to investing and owning property, and some financial experts call their behavior irrational. They are allowing past events to influence their strategy for the future. Some of them are completely paralyzed financially by those aftershocks. That means they have taken themselves out of the investment world. They sit on the financial sidelines waiting for another crisis.
There is some concern about the global economy, and the baby boomers think that concern is warranted based on recent signs. Chinese financial issues, emerging market recessions and inflation and the Greek debacle haven’t helped bring these aging investors back into the market, according to Mr. Dondero. Some economists think a global recession is eminent, but very few of them think it will destroy people’s lives the way the 2008 recession did.
The baby boomers aren’t the only generation that have changed their investment habits. The generation known as Generation X are going through the same scenario. Many of them were ruined by the recession, and they think another collapse is bound to happen. The Gen X-ers don’t like financial institutions. But in spite of their hesitation to invest for retirement, they will still retire, and that is concerning economists.
The baby boomers and the Generation X generations will face some very hard times if they are not prepared. Most of them say they won’t retire, and that may be true. Some workers that have reached retirement age are still working and still investing. That’s the main difference between the boomers that understand the capitalistic system, and the boomers that don’t trust it, according to Mr. Dondero.