I'm firmly of the view that AI is an incredible enabler of productivity, with much of its potential still to be realized. The past two decades haven't seen a step change in productivity at any great scale the same way computers and the internet once did. But AI is shaping up to be the break in that drought.
If you follow bond markets, you'll know government yields are hitting multi-year (in some cases multi-decade) highs. Lenders are demanding a higher return because they see more risk in lending to these institutions.
It's not cataclysmic, but it is symptomatic of countries that are struggling to grow their economies faster than their debt.
Aging demographics make that even harder. As birth rates fall, the working, tax-paying portion of the population shrinks, which tends to widen budget deficits.
Here's where it matters for investors. AI helps on one side of that problem. It lifts what each worker can produce. What it can't do, at least not yet, is consume the way people do (ChatGPT doesn't run on caffeine like I do).
So if there are simply fewer people buying things, consumer businesses built on volume could be in a tough spot over the coming decades. But not everywhere is shrinking, and plenty of companies are learning to do more with less.
This week's Market Insights article explores the process of finding where to invest as these demographic shifts play out. Importantly, there are two completely different ways to go about it.
Sincerely,
Mitchell Lawler, Senior Investment Editor
