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Secular stagnation

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In my last blog post, I asked, “Is this the end of secular stagnation?,” which I defined as low nominal economic growth due to insufficient aggregate demand. While I didn’t (and still don’t) have a simple “yes” or “no” answer, I shared my latest thinking on the topic, including some investment positioning ideas for clients.

This time, I’d like to look more closely at one of the main causes of secular stagnation — a global “savings glut” over the past decade-plus — and whether it’s likely to persist going forward.

How did we end up with a savings glut?

Outside the US, the “savings glut” to which I refer dates back to before the 2008 global financial crisis (GFC). Following the GFC, the US also began to accumulate…

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Brij Khurana
Brij Khurana
Fixed Income Portfolio Manager
Boston

My team and I often say recessions wipe the slate clean and create new investment patterns that will likely be dissociated from the last cycle. If there was a dominant theme of the last cycle — from the global financial crisis (GFC) in 2008 up to the onset of COVID-19 in March 2020 — it may have been “secular stagnation,” which I define as low nominal economic growth due to shortfalls in aggregate demand. Naturally, this begs the question of whether or not secular stagnation will still have legs in the post-COVID era.

I don’t claim to have a simple “yes” or “no” answer yet, but for now would like to share my latest thinking on the topic, to be followed by deeper dives on specific aspects of it (and hopefully more definitive answers) in additional blog posts throughout 2021.

Whence secular stagnation?

By way of context, it’s helpful to consider how we got here in the first place. Economists have attributed secular stagnation to…

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Brij Khurana
Brij Khurana
Fixed Income Portfolio Manager
Boston
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