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.
Finally, the bull market in stocks looks stretched from a historical perspective. Including this year’s gain so far, the S&P 500 is on track for four back-to-back years of double-digit gains, far outpacing the benchmark index’s average annual return of around 10%.
If stocks continue to rise, 2026 would mark the fourth year of the bull market, already outstripping the average bull run of around 2.7 years, according to an analysis from Hartford Funds.
An overinvested generation
A sudden and prolonged decline in stocks would be a huge dilemma for America’s baby boomers, the youngest of whom are turning 62 this year and may not have time to build back wealth lost during a severe market pullback.
Boomers held around $29.7 trillion in stocks and mutual funds in the first quarter, more than any other generation. The generation is also holding onto around 53% of all equity and mutual fund wealth in the nation, according to Fed data.
Around 37% of boomers were overly invested in stocks given the recommended equity allocation for their age, Fidelity said in 2023.
Stocks falling as much as 40% — which Oakley said was a reasonable expectation, given how quickly valuations had climbed in recent years — would erase $8 trillion to $11 trillion worth of boomers’ stock portfolios.
Oakley said he’d turn bullish on stocks once valuations fall back to more reasonable levels, and that he’s keeping cash on the sidelines to deploy when stocks become more attractively priced. For now, he believes the best investment opportunities are in commodities like energy, gold, and silver, which don’t look as overvalued as stocks and could benefit if the US sees hotter inflation in the coming years.
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