By: Dividend Sensei
Since the Nasdaq crash US productivity growth has been very low, causing many economists to conclude that we’ve entered an era of “secular stagnation” in which a combination of tens of millions of retirees leaving the work force, and a lack of game changing technology will mean slow economic growth in the coming decades. Naturally this would also cause stock market returns to be lower than their historical norm of 9.1% CAGR since 1871.
And while I admit that there is always the risk of long periods of slow economic and earnings growth causing sub par market returns, especially with valuations as frothy as they are now, there are still plenty of reasons to think that today’s pessimists will be proven wrong, as they have for over a century.
For one thing, I reject the idea that truly game changing, productivity boosting change is a thing of the past. After all, one need just look around at today’s burgeoning field of Artificial Intelligence or AI, and the coming wave of robotic automation to see that future corporations will be FAR more productive than they currently are. In fact, a recent study by Mckinsey concludes that automation could boost global productivity by as much as 1.4% a year. To put that in perspective it could result in increased ecnomic output equivalent to an additional 2.3 billion full time workers.
And while true that many people will face job distruption, (such as truck drivers being replaced by fleets of autonomous trucks), chances are that most of these people will be able to find work elsewhere, in more productive and better paying professions, (as has historically been the case). And even if it doesn’t, as I’ll explain in a coming article there is an easy solution for that.
Meanwhile, in addition to automation and the coming AI revolution, there are two other major growth catalysts to look forward to. First is material science, including short-term benefits such as far more efficient, energy dense and cost effective batteries, which will usher in a transition to green, cheap, abundant, energy and electric vehicles.
In the longer term room temprature super conductors could truly revolutionize the world, ushering in an era of ultra advanced super computers, and lossless electrical transmission.
And of course there is nantechnology, including advances in carbon science, including graphene and graphyne which could allow for space elevators to cut the cost of putting thins in orbit by a factor of 100 to 1000. That would open up the entire solar system, including the potential for asteroid mining (a single asteroid can hold over $1 trillion worth of precious metals).
And then there’s medicine, including advances in gene therapy combined with nanotechnology that could potentially cure most diseases, and even end or reverse aging itself. Think that’s crazy? Well an Alphabet subsidiary called Calico is working on a cure for aging!
All of these mind bending innovations, (and dozens I haven’t even thought of) are just a few decades away. To assume that they won’t allow us to achieve faster economic growth than 2%? Well that seems both preposterous and silly. At the end of the day we all have to choose whether to be pessimists or optimists, and I choose to stand with history’s greatest investor, Warren Buffett, in saying that the future of humanity, and the US and global economy, is brighter than ever.
Which is why I will always be investing in the stock market, through the best value dividend growth stocks I can find, betting on human and technological progress.