The Pomp Letter - Why Is US Life Expectancy Dropping?

To investors,

Investing is a game of demographics. You want to select markets that are ascending, not descending. Data points like population growth, percent of young people, and life expectancy are key indicators of where the world is going. Pick the right market and you can make the trend your friend. Pick the wrong market and you’ll have a strong headwind.

I want to spend our time today focused on life expectancy, which is simply “the average period that a person may expect to live.” You would anticipate that the most developed nations have the highest life expectancy, but that is not necessarily the case. We’ll use the United States as an example.

Max Roser and the team at Our World In Data point out that the United States has a lower life expectancy than other rich countries. Why is this? Roser explains:

“Americans suffer higher death rates from smoking, obesity, homicides, opioid overdoses, suicides, road accidents, and infant deaths. In addition to this, deeper poverty and less access to healthcare mean Americans at lower incomes die at a younger age than poor people in other rich countries.”

This is kind of crazy to think about. America, likely the most developed nation in the world, is worse off than other developed nations. But it gets even wilder when you add in how much Americans spend on healthcare in comparison to these other countries.

The United States is in a league of its own. There is no other wealthy country in the world that has a life expectancy below 80 years old, nor is there another wealthy country that has a health expenditure per capita above $7,000. The US checks both boxes.

These statistics alone would be concerning, but unfortunately there is another story that is capturing the attention of people who pay attention to national demographics.

ian bremmer @ianbremmer

china passes united states in life expectancy should be a headline in every us newspaper

September 7th 2022

11,179 Retweets42,429 Likes

Wait, what is going on here? According to Mary Hui from Quartz:

“The US’s life expectancy continued its decline from 2020 to 2021, dropping sharply to 76.1 years.

With the latest decline, US life expectancy is now at its lowest since 1996, according to new data from the Centers for Disease Control and Prevention’s (CDC’s) National Center for Health Statistics. It also means that the gap in longevity at birth between people in the US and China has now widened to a full year.”

This is not exactly shocking when you understand the reasoning. Hui writes:

“The biggest driver in the drop in US life expectancy is covid, accounting for 50% of the decline, according to the CDC. Government figures show that as of Aug. 31, over 1.04 million deaths in the US have been attributed to covid.

“Unintentional injuries”—which include opioid overdoses and motor vehicle crashes—were the second-largest contributor to the drop in life expectancy, making up 15.9% of the decline.”

This begs the question — will the US life expectancy recover or will the US buck the trend of wealthy nations as it sees a further decline in future years?

No one knows the answer. But we better hope that a quick reversal occurs, because other demographic data points like fertility rate aren’t going to make up for the loss. Data from Census.gov states:

“Fertility rates in the United States gradually declined from 1990 to 2019. In 1990, there were about 70.77 births each year for every 1,000 women ages 15-44. By 2019, there were about 58.21 births per 1,000 women in that age group. While broadly stable, annual births in the United States declined from about 4.1 million to 3.7 million from 1990 to 2019.”

So we are seeing US life expectancy recently drop for the first time in decades, and the fertility rate is on a three decade decline, so the demographics in the United States are not looking too hot right now. This doesn’t guarantee the leading democracy while fail, nor does it mean that investors should pull all of their capital out of US markets.

It simply highlights that the future may not look like the past. Investing is all about demographics and there is a strong, data-driven argument to highlight the US could have some of its most compelling trends left in the past. There are few countries that have been able to thrive for decades in the face of deteriorating demographics, so this is worth continuing to watch in the coming years.

Demographics are complex. There is plenty of debate and controversy around data collection, measurement methodologies, and what is actually important. Let this letter serve as inspiration for you to dig further and start doing your homework. Your future portfolio will probably thank you.

Hope everyone has a great start to the week. I’ll talk to each of you tomorrow.

-Pomp

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THE RUNDOWN:

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