Economic growth in the U.S. is going to be slower than normal—not just for the rest of this year, but for a decade, according to Phil Kastenholz, a partner and director in investment strategy and research at Aspiriant, a wealth management firm headquartered in Los Angeles.
Although there may be some short-term recovery, overall, growth will be limited to 1% to 2% for the next 10 years because of the amount of debt that is now present in the economic system, he said in an interview today.
“Economic growth will be lower than what we [have been] used to for quite some time,” said Kastenholz, who is based in Milwaukee. But investing options exist to offset the low domestic growth rate, he added.
Aspiriant feels international investments, particularly investments in emerging markets, hold promise to offset a slow-growing U.S. economy.
“We believe markets go in cycles, [although] you cannot know when a cycle will begin or end,” he said. “The 1990s were good for the U.S.; the 2000s were good internationally; and the 2010s were good for the U.S again. We are concerned about the U.S. markets going forward.”
Aspiriant believes investors should be looking overseas for good returns, which is “an exposure that has not worked for the last 10 years [as the U.S. economy has been dominant], but is a place we now see more opportunity,” Kastenholz said.
In addition to slow economic growth, “inflation could eventually make a comeback in the U.S.,” he added.
He said U.S. investors may want to put a small portion of their portfolios in commodities such as gold to offset inflation in the U.S.
“We see emerging markets as having a better outlook than developed markets,” he added. “There are companies that are valued very low right now and are under-appreciated by investors in emerging regions, which are less consumer-oriented than the U.S. Emerging market economies will benefit from the growth of a middle class. For instance, businesses that we are used to here but are less sophisticated in emerging markets” will be attractive in the future, he said.
“For instance, energy companies in emerging markets will benefit from the pain U.S. energy companies are experiencing,” he added. “In the United States, companies that have the ability to price their products will benefit if inflation re-emerges. But right now, some of the large companies in the United States are overpriced.” Investors should look to “smaller companies that could bring reasonable returns,” he said.