An Expected Driver of Growth
The resurgence in earnings combined with future potential tax cuts may drive an acceleration in business spending that could outpace the broader economy. Gains in labor productivity would likely follow, creating an opportunity for investors to reposition themselves for a new wave of growth.


  • There is a strong relationship whereby business spending tends to spur greater labor productivity, as demonstrated by the data above.

  • Robust profit growth has historically generated higher business spending and S&P 500 profits are currently growing strongly after a two-year earnings recession.

  • Additionally, a Trump administration tax cut would likely favor businesses and thus lift business spending by increasing enterprise cash flow.

  • If labor productivity indeed rises on the heels of heavier business spending, we expect that it will boost economic growth. Investors might position their portfolios by allocating to B2B companies that benefit from business spending and facilitate labor productivity, such as software companies, digital media companies, technology equipment makers, and medical equipment manufacturers.

The views expressed are the views of Fred Alger Management, Inc. as of Novemeber 2017. These views are subject to change at any time and they do not guarantee the future performance of the markets, any security or any funds managed by Fred Alger Management, Inc. These views are not meant to provide investment advice and should not be considered a recommendation to purchase or sell securities.​​

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