You Have To Spend Money To Make Money
It can be difficult identifying an economic, market, or policy topic to write about weekly that we think will be one that is both of interest to our readers and one that we are comfortable addressing. That has been less of a challenge of late, considering the crisis in Ukraine, historically high inflation, a hawkish Fed, and the worst start to the year for US equities in two years and for US bonds in decades. As we will be speaking to those topics in our upcoming quarter-end Q&A VLOG, we wanted to take pen to paper this week on a more mundane point, but one that is incredibly important to the health of the US economy, and that is the ongoing – if little-noticed – boom in capital spending. As we know, GDP growth comes from people and productivity – the more people in the workforce and the more productive they are the more growth our economy can produce. That written, workers need physical assets to work with day to day (think PCs, forklifts, airplanes, etc.) if they are going to deliver more goods and services, and if those assets go stale, or become antiquated, growth will suffer. As our population ages and we struggle, at least for now, to fill those millions of jobs that go wanting, more modern physical equipment becomes even more important.
On that front, we have very good news of late; according to The Wall Street Journal, private nonresidential business investment adjusted for inflation grew 7.4% year on year in 2021, the fastest pace since 2012. And according to the US Bureau of Economic Analysis, Real Private Nonresidential Fixed Investment just hit an all-time high, taking out its pre-pandemic peak (see chart; by way of comparison, it took six years for Nonresidential Fixed Investment to exceed its pre-Great Recession peak). It might not be the most top-of-mind topic to focus on, but the fact that the economy continues to merit and attract meaningful capital investment, and meaningful spending on productive assets, is very good news for our ongoing economic expansion, and our economy’s long-term potential.
The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Brinker Capital Investments, LLC, a registered investment advisor. 0559-BCI-4/4/2022