Beware the siren song of growth: The lesser-known prime hunting grounds for investment ideas

Search for growth

Growth has an almost irresistible allure for investors. Whether it is a rapidly growing economy, a start-up with a hot new product, or a new industry that promises to transform our lives, investors are naturally drawn to opportunities that seem to offer the greatest long-term growth.

Likewise, it is tough for most to envision a stagnant economy or a dying industry as a prime hunting ground for investment ideas. History tells a very different story. Looking back over more than a century of data and across 19 countries, there is actually a slight negative correlation between real economic growth per capita and real equity returns.  For example, even though Japan had the highest economic growth rate over that period, its equity returns were about half that of South Africa, which was the weakest economic performer (see chart below). The demographic trends powering ...