End of Changes Due to Outsourcing Off-shore

In an article about economic optimism, The New York Times makes the point that the global adjustment for cheap Chinese labor was a one-time adjustment and it is mostly over. While China’s population ages, its wages increase, its pool of cheap labor is being depleted. While some of the same dynamics apply to other nations seeking to enter global markets, we are coming to a point where these nations are as much consumers as they are cheap producers.

Thus, there will be a natural flow of work back to the USA and Europe. This will be a long-term correction back to a new normal. It will also be hastened by the two largest economies, the USA and the EU-UK changing their posture in regard to China in order to protect their own markets and sovereignty. We can expect that this factor alone will help bring jobs back into the USA, especially when the Biden infrastructure efforts create jobs that only can be done within the USA.

Covid-19 Era Savings

As terrible as the Covid-19 pandemic has been, not everyone has lost their job but everyone is able to spend less. Thus Americans have socked away roughly $1.8 Trillion more than usual during the last year and much of this is waiting to be spent on long-delayed vacations, purchases of homes, or business improvements. Although spending this money will be a short-term economic stimulus it will be part of the reason for the 7% US economic growth this year.

Biden Infrastructure Surge over the Long Term

Provided that Biden’s infrastructure plans go through, government spending to accomplish this will be cheaper now during a period of low interest rates than it would have been when rates were higher. The sorts of projects that are envisioned, like modernizing ports and airports, repairing bridges and highways, installing a 5G network nationwide, and others will start creating jobs by the end of the year and will continue to do so for years to come as these types of projects commonly take a decade or so to complete. The payoff after that will come from increased efficiency of the US economy directly from these projects and from the maturing of new technologies. This will very likely be the first leg of a long-term economic boom.

New Technologies Come of Age

We wrote recently about battery production as part of the move towards clean energy. When advanced technologies are first developed, they are not always profitable. AI (artificial intelligence) seems to fit the picture at the current time. However, as AI, advanced battery storage devices, and other new technologies become integrated into industry and society, they could help fuel an economic boom that lasts and lasts. The key for the USA is to get on board with these technologies, use them to create jobs, and use them to create sales.

Assessment of Intrinsic Stock Value for the 2020s

A key to successful investing during the coming economic boom will be the assessment of intrinsic stock value. Who is positioned to take advantage of infrastructure projects, which is best-positioned to make money by integrating new technologies? Very often the first companies in an investment niche are not the ones who dominate in the long term. Competent management is important and here is where the governance aspect of ESL investing is important.

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