Innovation is alive and well and much stronger than the economic statistics such as productivity would have people believe. It’s also keeping a tight lid on inflation and creating a strong case for growth stocks and especially technology shares, said Brad Neuman, vice president at Alger Funds. ‘We think productivity is higher than it appears and inflation lower so that means interest rates will be lower for longer and that should support market multiples,’ said Neuman. Neuman said productivity is stronger than the data suggests for three main reasons, starting with the government’s mismeasurement of inflation. He said healthcare and technology have the biggest issues and because they are two of the fastest growing sectors in the economy, the overall mismeasurement is likely growing. Neuman also said productivity is stronger than the headline numbers suggest because the internet is excluded and profound innovations like cloud computing, immunotherapy and gene editing will take some time before affecting the data.
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