OECD warns of Asset Meltdown Hypothesis

The Organisation for Economic Co-operation and Development has warned of a threat to financial markets they term the Asset Meltdown Hypothesis.

The comittee warned of a significant shift in age structure of the human population will affect savings behaviour and economies with it, with people born after 1945 soon becoming net sellers of their assets to fund retirement.

The size of this “baby-boomer” group would create a downward pressure on financial asset prices. Additionally, in an environment of pension short-falls and adverse conditions affecting retirement income, there may be a move from equity to fixed-income instruments.

The OECD recommends that trust fund managers already start moving towards long-term savings plans, such as bonds, to help avoid equity markets being impacted by the large-scale movement of funds by individual investors at retirement.

The OECD has called upon governments to start providing support for long-term fixed instrument savings.

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