The core of our work at Dent Research is what we call the Dent Method, which our founder and economic expert, Harry S. Dent Jr., developed in the late 1980s.
The Dent Method has the only documented record of success at forecasting long-term economic trends based on the study of and changes in demographic trends and their impact on our economy and the markets. It works by showing how predictable consumer spending patterns, when combined with demographic trends, allow us to forecast the economy years or even decades in advance.
Our method is based on five key precepts, which are:
- Predictable spending patterns at different ages and stages of life: As we move through life, we change our spending in very predictable ways. These predictable spending patterns impact our economy, business, and product trends. Everything from the demand for potato chips and real estate to inflation rates, cycles of innovation, economic growth, immigration rates, and domestic migration — locally, nationally and globally – are impacted. By analyzing this information we can successfully forecast how spending will change in the years and decades to come.
- Who spends what in the economy and its demographic impact: Personal consumption, or what people do as consumers, represents about 70% of the Gross Domestic Product. That means that how people as consumers spend money is the largest influence on our economic health. As larger groups of consumers age and spend more, the economy grows. When large groups in the population pass their peak stage in spending, this leads to less spenders and slows down the economy.
- Our birth rate and the immigration adjusted birth index: 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.
- Our Spending Wave: If you look at U.S. history, we have had extended booms for 26 to 28 years followed by busts for 12 to 14 years. This happens because new generations come along about every 40 years. As mentioned above, as they age, they move through predictable earning, spending and productivity cycles. We forecast the peaks and troughs of these cycles by moving the birth index forward by the appropriate number of years to estimate peak spending.
- The Inflation Indicator: Economists think that inflation is largely a monetary phenomenon. It’s not. In reality, inflation is the economy’s means of financing not only the new, young generations that will become highly productive in the future, but also the new technologies these new generations bring. The combination of a slowing economy from declining Baby Boom spending after 2010 and a slowing of workforce expansion will create a deflationary slowdown in the U.S until 2023.