October 11, 2011
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Investors can be excused for their preoccupation with short-term Investment results. Amidst a cascade of dismal economic news, the trauma of a precipitous fall in stock prices and the overhang of a decade-long drought in equity returns, the idea of “taking a long-term view”, to many, seems hopelessly pollyannaish. Yet, long-term planning has never been more essential. Aging “Baby Boomers” today are grappling with retirement funding challenges that span multiple decades at a juncture where interest rates are at dismally low levels not seen since World War II.
Fortunately, just as the excessive optimism of the tech boom was so misguided at the turn of the millennium, the excessive pessimism of today’s “new normal” may be similarly misplaced. According to a comprehensive report by Citi Investment Research and Analysis1 (CIRA), global GDP growth over the next several decades is likely to enjoy a pace not seen since the post WWII reconstruction and growth boom of the 1950’s and 1960’s. This faster growth is illustrated in the following graph which compares the annual average world real GDP growth for the decades since 1950 with CIRA’s forecasts for the coming four decades.
The 4.6% and 4.7% annual real GDP projections for this and the next decade, respectively, harken back to the 4.7% and 5.0% growth rates after WWII.
1. Willem Buiter and Ebrahim Rahbari, “Global Growth Generators: Moving beyond ‘Emerging Markets’’ and ‘BRIC’”, Citi Global Economics View, February 21, 2011.
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