According to Christopher Mahon, director of asset allocation research, economic growth will be ‘moderate at best’ over the next ten years.
He said it is unlikely the US will be able to grow anything near as fast as the 4% rate it was able to ten years ago.
Other parts of the developed world will also face ‘challenges’ in achieving solid growth numbers due to factors such as aging populations and sluggish productivity growth, Mahon said.
Credit regulation prompted by the global financial crisis will also act to constrain investment across advanced economics.
Mahon said his team has estimated average GDP growth for the US and UK will be lower than consensus estimates at just 2.3% and 2.2% respectively between now and 2025.
He said that institutions like the International Monetary Fund and the US Federal Reserve have ‘consistently overestimated potential growth’ and have not embraced the ‘magnitude of the secular changes taking place.’
Notwithstanding this, Mahon believes equities will be the best asset class to invest in on relative basis, with the UK, Japan and emerging markets the top performers.
