Lofty Goals
This chart shows the required earnings growth to generate the same return over the next decade as we have over the last. We can jump to the punch line here: it’s difficult to imagine how those growth rates could be achieved—particularly in the U.S. The implication is that investors should be braced for lower broad-based equity returns and be more focused on asset class and manager-specific return profiles.
This does not mean that in any given year markets won’t produce incredible returns; it just means that, on average, the next decade certainly has a much higher bar to clear.
High hopes
More fascinating data on the adoption and impact of artificial intelligence (AI).
I think this survey acts like a Rorschach test on AI. If you are optimistic about AI’s possibilities, you can look at these charts and say that AI adoption is increasing rapidly, and the power of AI tools is growing so fast that productivity gains are going to be large.
AI sceptics, in contrast, can argue that after three years, when AI could have made the biggest impact on productivity since it is starting from scratch and the low-hanging fruit is plentiful, the productivity gains are still only 0.3%. Plus, use cases seem to be restricted mostly to writing texts and creating images (some would say corporate AI slop), where productivity gains will stop pretty quickly going forward.
The Ultra Rich are Different
A fascinating dissection of the taxes paid by the top 1% wealthiest Americans, which supports the point that the wealthy do, in fact, pay significant taxes, but a small segment of the ultra-wealthy skew the data.
First, let me make the point that it’s the ultra-rich, who account for only a tiny fraction of the 1 percent, who have been pulling away from the rest of the nation.
The Beautiful Chart
A counter to the commentary that opened this edition of Insights: Morningstar has put together data arguing that this bull market isn’t nearly as long in the tooth as many believe. We still think the point we made on average returns stands, but, as always, the timing of a correction is anyone’s guess.
For instance, US stocks had notched a 4.5% annual inflation-adjusted return over the 10 years ended Oct. 31, 2007. Yet less than a year later, investors were looking at a lost decade amid the damage that the global financial crisis had wrought
Canadian Views of America
A piece from Politico on the state of Canada/U.S. relations. There are some stark figures here. Though the majority opinion that Canadians consider the U.S. a bigger threat than Russia is likely influenced more by recent events than political reality, it is nonetheless a jarring datapoint.
Canadians were the most likely—among respondents in Canada, Germany, France and the U.K.—to say the U.S. is not a reliable ally (58 percent).
Gallant MacDonald is a Private Investment Office serving a select group of ultra-high net worth families who have made significant contributions to business, public service, and philanthropy.
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