Future productivity trends important

The latest research and analysis paper released by Standard Life Investments, based in the United Kingdom, argues that investors need to be aware that future productivity trends will have significant implications for financial markets.

The fund manager urged investors to monitor the efforts of different companies and countries to raise their productivity.

At a company level, it argued, one trigger would be the success of businesses in implementing structural change in order to prosper in the new environment of slow economic growth. At a stock market level, Standard Life Investments advised investors to look for exposure to the parts of the world where productivity trends were changing course or holding up well.

Head of global strategy at Standard Life Investments Andrew Milligan said it was understandable that governments were focused on cyclical issues such as lowering unemployment rates, or developing exit strategies from unconventional fiscal policies.

“However, global investors should look ahead to the shape of the forthcoming business cycle,” said Milligan.

In its research paper, Global Perspective, the fund manager focused on changes that would lead to revised market expectations and price — and ultimately, a superior return for clients.

“Organisations such as OECD currently forecast moderate potential output growth for its members, by past standards, with only a few countries growing strongly and many exhibiting rather weak trends,” added Milligan.

He said projections were uncertain at the best of times, and even more so following a financial crisis.

“Academic research suggests that such events can have a long lasting impact on future growth as productivity is damaged,” he said.