Investors should look beyond negative news about the U.S. economy, which is stronger than it seems and will continue to benefit from relatively low interest rates, acording to a BlackRock money manager.

“We have a different view than others,” money manager Rick Rieder said Wednesday. “We believe that the traditional way of measuring the economy is flawed,”

His comments came during the BlackRock Income Media Roundtable in Manhattan.

The flaw in traditional economic thinking, BlackRock officials said in a report, is assuming “a robust relationship between growth and the level of interest rate levels.” They contended that type of thinking “doesn’t work today.”

The decreasing number of workers entering the economy is acting as a downward pressure on interest rates, according to Rieder, who is BlackRock’s global chief investment officer of fixed income. When fewer people enter the workforce it “dulls” consumption and inflation rates, he added.

Demographics are becoming a critical factor and a reason why interest rates will remain low for the foreseeable future, Rieder said. “It is why Japan is going to keep its rates low for years to come and Europe will be the same,” he said.

BlackRock’s report cited other factors affecting the economy and the investment climate: “The world is experiencing a service and technology revolution, which is changing output and income dynamics faster than ever before in history, and it is a very good story, not a skeptical lack of productivity story,” the report states.

At a time when central banks are offering historically low rates, fiscal policy is becoming more important than monetary policy, Rieder said. The U.S. economy, he added, has been creating jobs at a brisk pace. “We’ve created more jobs in the last three years than we have in the prior 10 years,” he said. “The U.S. economy is operating at a really strong level.”

However, he added that we are “living in a slower-growth world” because more people are taking from the economy instead of adding to it.
As the population ages, Reider said, the demand for income is going to become huge.

It follows that, as interest rates stay low in developed economies, portfolios must be diversified, meaning investors and advisors should consider foreign markets, Rieder said. Foreign markets recommended by BlackRock officials include Indonesia, Colombia, Brazil and Argentina.

Bad inflation—price increases in necessities such as food, shelter and energy—is coming down dramatically, which is improving productivity, he said.
“When people say we’re not growing, that’s just not true,” Reider said.