New generations come along about every 40 years. As they age, they move through predictable earning, spending and productivity cycles. The peaks and troughs of these cycles can be forecasted by moving forward the birth index (which we adjust for the births of all past and future projected immigrants) by the appropriate number of years.

The Dent Method reveals that economic boom and bust times are determined by demographic factors. Individual spending tends to peak in the late forties. Thus, aggregate spending should correlate with the size of the late forties population. If we plot the estimated size of the late forties age cohort with the projected year, we obtain a generally rising trend that shows a number of peaks and troughs due to past variations in birth and immigration rates. For example fewer babies were born during the Great Depression than either before or afterward. Thus, we would expect that 48 years later (during the 1970’s and early 1980’s) there would be a corresponding drop in the number of middle age people. Economic boom times are associated with an increasing size of the mid-forties population and bust times are associated with a decreasing size of this population. The oscillation in the number of middle-agers at their peak-spending years is called the spending wave.

Economic boom times are associated with increasing size of the late forties population and bust times are associated with a decreasing size of this population.

With Every Other New Generation Born Comes Innovation

The Generation Wave

Every 80 years, or every other generation, an innovative generation is born that revolutionizes technology, introduces fresh social trends and builds entirely new industries from the ground up. The Generation Wave is a forecasting tool HS Dent uses to gain a macro view of these innovators as they move through the stages of life. Why? This generation fundamentally and predictably impacts every aspect of the economy from inflation to housing starts to stock prices.

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