Robert Doll's opinion is that "You could say we're the best house in a bad neighborhood". Damned with faint praise? Not really - hit the link for the full feature.
Investment strategist Robert Doll says America's edge is faster population growth, companies that are global in scope, and a culture of innovation and entrepreneurship.
"Over the next 20 years, the U.S. work force is going to grow by 11%, Europe's going to fall by five, and Japan's going to fall by 17. This alone tells me the U.S. has a huge advantage over Europe and a bigger one over Japan for growth," he says. "And the reason for this is pretty simple. We have higher immigration than both of these, and we make more babies. We have a higher fertility rate. And they are the long-term determinants of population growth and therefore work force growth." Mr. Doll and his wife seem to be doing their part with three children.
But many Americans, whether they favor pundits on the right or the left, may have a hard time accepting that population growth and immigration are the keys to our prosperity. Mr. Doll explains the economics: "The long-term growth rate of any economy is the product of the change in the size of the work force multiplied by the productivity of the work force." Productivity is very hard to predict, he reports, but demographics is easy. "You count noses." And that tally shows a very healthy America.
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Mr. Doll's optimism comes despite his skepticism about the last several years of heavy government intervention in the economy. His team at BlackRock calculated that, at most, half of the 2009 stimulus program was "true stimulus" for the economy. What about the rest? "Call your congressman and find out where the money went." More than a few readers may be tempted to call BlackRock and ask how they concluded that even half of it was spent effectively.
What about the impact of ObamaCare, the 2010 Dodd-Frank financial reform law, and the president's continuing advocacy of tax increases? "All three of them are retardants to growth," says Mr. Doll.
He also concedes that "we face formidable long-term structural problems that make the U.S. less attractive than it otherwise might be," and yet he has written in these pages about America remaining a "city upon a hill" in the vision of Puritan John Winthrop. Mr. Doll could be making the least inspiring case for American exceptionalism in the history of the republic. "You might say we win by default, which is not a fun way to win," he says.
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But an investor would still have more upside in developing countries than in the U.S., right? Mr. Doll says that if he were forced to lock up his money in one place for the next 10 or 20 years he would indeed select the developing world and specifically India over China.
China's population will grow only slightly faster than that of the U.S. between now and 2030, he says, whereas he expects India's population to increase 32%, suggesting robust GDP growth. "The one-child birth policy in China will eventually arrest the growth rate of China to a much smaller number."
But in the short run, Mr. Doll likes the U.S. equity market best of all and reports that this is where most of his personal investments are, largely in the funds he oversees. "The U.S. stock market and the U.S. economy are increasingly different animals. It used to be when U.S. economic growth went a certain direction, so did the stock market," because so much of the business done by these companies was domestic. But now 40% happens elsewhere. Mr. Doll estimates that, over the next five years, 70% of the incremental earnings growth of S&P 500 companies will come from outside the U.S.
Part 2 tomorrow (if you hit the link above you can read the whole thing now).
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