Salient to Investors:

Older people are growing and are more likely to forgo purchases of houses, cars and other big-ticket items that the Fed is trying to encourage with near-zero interest rates.

William C. Dudley at FRB of New York said spending by older age people is less likely to be easily stimulated by monetary policy, and will fall as they anticipate tax increases and cuts in Medicare and Social Security.

Britt Beemer at America’s Research Group said people usually save more as they near retirement, and this effect is magnified because Americans’ wealth has been depleted by the financial crisis. Beemer said many retirees are staying in their homes, moving closer to their children or getting smaller houses, instead of traveling or buying luxury items and second homes.

From 2007 to 2010, the median US household net worth fell by 38.8 percent to $77,300, the lowest level since 1992.

The US saving rate averaged 4.3 percent in the 39 months since the recession ended in June 2009, versus an average of 2.3 percent in 39 months before the start of the recession in December 2007. said the interest rate on a 5-yr CD fell below 1 percent for the first time on Sept. 20.

The National Center for Policy Analysis said the postwar generation is shifting spending toward education, mortgage debt and adult children, and away from entertainment, dining, furniture and clothes. Pamela Goodfellow at BIGinsight said retirees are consistently more frugal than younger age groups.

James Kee at South Texas Money Mgmt said the demographic shift will benefit companies such as UnitedHealth and TEVA Pharmaceutical, while Brian Jacobsen at Wells Fargo Advantage Funds said manufacturers and retailers of discount consumer products will benefit.

The National Academy of Sciences said Americans will need to increase savings, delay retirement and prepare for changes to entitlements. Roger Ferguson at  TIAA-CREF said fewer and fewer people working are supporting more and more people who are not working.

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