How Female Demographic Trends Are Affecting Investment Markets

Historically, investing, building wealth and being ambitious with money have been imbued with masculine connotations, but that is changing, with profound consequences for markets, says Annabelle Williams.

Speaking in the latest FTAdviser In Focus Fireside Chat, Nutmeg’s personal finance specialist says that, culturally, women have been encouraged to manage their money only when it comes to household finances.

But now, a growing number of women are engaging in personal finance, money management, and investing in ways that previous generations weren’t.

Moreover, as the female population becomes increasingly active in the labor market, this may affect the performance of markets.

A recent report by Ned Davis Research highlights the mature-young ratio, which indicates that if there is a large proportion of older workers to younger workers, stock markets tend to outperform.

The reason for this is that older workers are more productive and earn more money which they then invest in stock markets, driving up prices. Women play a unique role in this ratio, as they are less likely to earn more but more likely to save money for retirement than men.

“The MY ratio, when applied to US markets, has accurately predicted both bull and bear markets for the past 50 years,” says Williams, “and the unique role women play in this theory is that, although that women still struggle with the pay gap and having to miss work for periods of time and spend time in unpaid work to care for children or parents, despite these difficulties they still save more for the retirement than men in proportion to their income are more likely to opt for low-risk lifestyle funds that match their age group.

“Overall, this basically means that if women continue to close the pay gap, gain as much economic power as men, and continue to increase their participation in the labor market, it will be positive for stock markets. “

Governments, such as that of Japan under Shinzo Abe, have already responded to this logic by creating incentives for companies to improve their diversity goals in order to foster economic prosperity.

And there were also industry initiatives in the UK, such as Helena Morrissey’s Girl fund, although this did not generate enough interest at the time.

“There could be many reasons for that,” Williams says. “But if we step back and think, rather than looking at specific products, what the industry can do to better meet the needs of female investors, one popular avenue is for companies to have dedicated female hubs on their websites. Nutmeg, we don’t have one and that’s because we believe that, like the gym, the investment should be gender neutral.”