“We can look ahead to 2%-to-2.5% real GDP growth instead of the 4% we have come to expect since World War II?” - By Michael Wilson, Chief Investment Officer, Morgan Stanley Wealth Management
Below summary by Anthony O'Brien
While there is still some disagreement around the sustainability of the current economic expansion and the equity market rally, there is little opposition to the idea that longer-term returns and growth are likely to be lower than normal.
Real GDP growth is mainly a function of three things: population growth, labour productivity and credit growth. Over time, population and productivity don’t change that much, leaving credit as the big swing factor, and it’s obvious that in the wake of the financial crisis, this factor is going to remain sluggish.
Many investors have taken this slower growth to mean a recession is imminent and hence, corporate profits and stocks are heading for a serious correction. The reality is that corporations have done a great job of operating in this new slow-growth environment and continue to generate record profits and impressive earnings growth.To read the full article click here