Investors are beginning to take a closer look at the tight labor market and recent tax overhaul and make the connection to the potential for rising prices and an increasingly aggressive Fed. What is getting less attention is the critical role that productivity could play in forestalling those dangers. Or not.
In this edition of QMA's Market Pulse, "All Eyes on Productivity," QMA's Global Multi-Asset Solutions team explains why productivity growth is one of the metrics it is watching for clues to the staying power of the current economic and market cycle. The team notes that the past decade of anemic productivity growth would ordinarily be a cause for pessimism on this front, but also highlights the early signs it is seeing of a productivity pickup, and how this could yet spawn a new virtuous cycle of rising wages, benign inflation conditions and higher GDP growth.