Is Economic Growth Bad for Investors?

While this growth in emerging markets may lift hundreds of millions out of poverty and spur investment and innovation, evidence suggests investors may be left behind

Alex Bryan 24 October, 2016 | 10:14AM
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By 2050 the world's population is projected to reach 9.7 billion, up from 7.4 billion today. Nearly all of that growth will come from emerging markets, where living standards are rapidly improving.

Although these markets have experienced large capital inflows, they still have a long way to go to match developed countries' levels of capital, productivity, and wages. Consequently, emerging markets will likely continue to grow faster than developed markets for the foreseeable future. While this growth may lift hundreds of millions out of poverty and spur investment and innovation, evidence suggests investors may be left behind.

Jay Ritter, a professor at the University of Florida, documented a negative relationship between economic growth and stock market returns in his seminal research paper, "Economic Growth and Equity Returns," published in 2005.

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About Author

Alex Bryan  is an ETF analyst with Morningstar.

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