Millennium Trends: What to Look for in 2000 and Beyond
by Michael Strickland
for
Emerald Publications'
Financial Ink Newsletter, 1999
It’s been called "the bridge to the 21st century," "Y2K," and "the third millennium," but by any name, the year 2000 marks a major historical milestone. With the U.S. enjoying a record-breaking period of economic expansion, the Information Age coming into full bloom, and the emergence of new products and technologies, several emerging trends herald an era of great change.
A revolution in technology, a proliferation of new financial services and products, and the aging generation of baby boomers all promise to irreversibly alter the face of our society—and our economy—in the coming decade. Here’s a look at three major trends.
The Maturing Information Age
In his book The Third Age, futurist Alvin Toffler
chronicled society’s evolution from the
Industrial Age to the Information Age. Now the
Information Age is going digital. In less than a
decade, the Internet has been transformed from a
fun fad to a society-changing phenomenon. Nearly
half of all adults in the U.S. will be online in
the year 2000.1 E-commerce is
flourishing, with revenues from Web-based
transactions forecasted at more than $204 billion
in 2002.2
For investors, the World Wide Web has brought about wholesale changes in how financial information is collected and disseminated. Investors can now buy and sell securities at the click of a mouse. And half of all mutual fund investors now access information on the Internet, up from just 18 percent in 1996.3
This trend already troubles those who study investor attitudes and behaviors. Although online trading offers a greater degree of freedom over one’s investments, a self-service investment strategy may pose risks of its own. A 1998 research study concluded that investors who traded frequently—behavior characteristic of many "cybertraders"—earned significantly lower net returns than those who followed a "buy and hold" philosophy.4
An Array of New Financial Services
Nor are "virtual" financial services limited to
online trading. As more U.S. households own
computers, electronic banking may offer a greater
number of customers the option to manage accounts
from the comfort, privacy, and security of their
own homes.
The 1990s have seen a rise in the popularity of innovative investment products, including equity-indexed annuities, unit investment trusts, and "funds of funds," a type of mutual fund that invests in other funds for enhanced diversification. And industry observers forecast further innovations on the horizon.
Baby Boom Becomes Senior Boom
The greatest long-term effect on the U.S. economy
over the next decade may come from the baby boom
generation – those born between 1946 and 1964.
Economist Harry Dent predicts a period of
prosperity during the first decade of the new
millennium, which he’s dubbed the "Roaring
2000s," brought about by Baby Boomers entering
their peak spending years.5
Whether his forecast will come true is anyone’s guess. What seems certain, however, is that this 70-million-strong demographic force may have an ongoing need for such services as retirement planning and estate conservation.
Longer lifespans could also prompt revised investment strategies. As baby boomers retire, there are expected to be fewer workers per retiree, potentially putting more pressure on the Social Security system. Individuals may face an intensified need to prepare for a retirement with declining supplemental assistance from both government and business.
An aging population will also tax the nation’s health care institutions. Americans may have to shoulder a greater portion of their medical and long-term-care costs, giving rise to increased demand for risk management products such as Medigap and long-term-care insurance.
Stop and think of everything the 20th century has brought us—from dreams of flight to airplanes to space shuttles, from the horse and buggy to automobiles, from mechanical adding machines to powerful desktop computers. If the changes to come in the 21st century are anywhere near as dramatic, exciting times are surely ahead.
1) Intelliquest, March 3,
1999
2) Zona Research, October 25, 1998
3) Journal of Financial Planning, March 1999
4) "The Common Stock Investment Performance of
Individual Investors," by Brad M. Barber and
Terrance Odean, University of California at Davis,
January 1999
5) Barron’s, July 6, 1998
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