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A stock market upheaval would torch baby boomers’ retirement plans, Ted Oakley says.
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The wealth advisor sees the S&P 500 falling as much as 40% in a generational bear market.
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A decline that steep could wipe out as much as $11 trillion from boomers’ portfolios.
Baby boomers are the wealthiest generation, but their hefty investment portfolios also make them exposed to a steep plunge that could scramble their plans for retirement, one wealth advisor is warning.
Ted Oakley, the managing partner at Oxbow Advisors, says he’s concerned about the boomer generation, the youngest of whom are quickly approaching their retirement years. Oakley sees a long-running decline in markets as the AI bubble unwinds, an event that could jeopardize the trillions of dollars that boomers have built up in their investment portfolios, he told Business Insider this week.
In the end, the result could be what Oakley calls a generational bear market, which begins with the S&P 500 tumbling as much as 40% before entering a yearslong stretch of meager returns.
“Because of all the leverage and all the black box investing and all of the total speculation that’s in this market, when you do get selling, you get it fast and furious,” Oakley, whose firm manages over $2 billion, said.
Oakley speculated that 2027 could be the first year markets begin to feel serious pain since the start of the AI bull run kicked off at the end of 2022.
He didn’t have a concrete forecast for how long stocks could struggle, but said he wouldn’t be surprised to see a lost decade for stocks similar to the years that followed the dot-com crash.
“It just won’t be the same rate of change,” he added. “You’ll have a double-whammy coming at you.”
Investors have been increasingly worried about the sustainability of the AI trade this year, but the proof is in the market’s valuation measures, most of which are showing that stocks are in the upper echelon in terms of how highly equities can be valued, Oakley said.
Oakley pointed to the Buffett Indicator, a famed valuation measure popularized by Warren Buffett, which has climbed to a record.
The indicator, which measures the value of the stock market against US GDP, clocked in at 236% this week.
“One area of the entire stock market shouldn’t be almost two and half times what the entire gross domestic product is,” he said, referring to how most of the market’s gains in the past four years are attributable to AI.
The price-to-book ratio of the S&P 500, which compares the index’s total value to the book value of each company in the index, is also at extremes. The ratio is hovering around 6x, its highest-ever recorded level.
