Hurricane Sandy and uncertainty about looming tax increases and spending cuts are putting a drag on third quarter growth in gross domestic product (GDP) reported last week.
The 2.7% growth rate is expected to slow significantly in the months ahead and has investors searching for investment options.
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It’s going to take a much broader mix of assets to deliver decent returns with reduced volatility.
Dividend-paying stocks, master limited partnerships, REITs, gold, non-US bonds, and absolute return strategies are at the top of the long list.
The US economy is expected to grow only 1.4% in the coming months, counter to the third quarter growth rate and the historical average US growth rate of 3% over the last 100 years.
Growth in population, employment, and productivity have been cited in negative fashion by Jeremy Grantham, GMO LLC’s chief investment strategist, as the three factors to watch.
Bill Gross and Mohamed El-Erian of PIMCO share the negative short-term view but do not share Grantham’s Armageddon-like outlook.
The two, instead, find little about which to be concerned, nor do they think there is any real threat to long-term growth.
Developed countries around the globe have been growing pretty reliably at an average 1.8% rate over the past two centuries.
There’s little doubt the massive aging population will be a drag on growth but prosperity is a more important yardstick than population or productivity.
Per-capital GDP can fall with sudden increases in population. And Laurence Siegel, director of research at the CFA Institute’s Research Foundation wrote in a recent paper that creativity and invention
seem to be accelerating further.