Macro Strategy Insights from Jack Ablin, CFA, Chief Investment Officer at BMO Wealth Management

Last week, I attended a private event hosted by BMO Wealth Management.

The distinguished presenter was Jack Ablin, CFA, and Chief Investment Officer of the wealth management group.

This is the fourth time I’ve seen Jack talk about his macro view of the economy. His insights are well-researched. Oftentimes he deviates from mainstream economic thought. He is brilliant.

I thought you’d appreciate me sharing some of my notes.

Economic Growth

  • Growth requires 1) cheap capital, 2) high-quality labor and 3) deregulation.
  • Deregulation will have a large positive impact on small businesses because the relative cost of regulation is higher than for larger companies.
  • It is estimated there is potential growth of the labor force of 0.7%, and 1.5% increase in productivity. This translates into a 2.2% average GDP growth rate.
  • We hear a lot of politicians talk about getting to 4% growth. It can be achieved over the short term, driven by tax reform, lower corporate tax rates, repatriating $2 to $3 trillion cash , and increased capital investment.
  • 4% GDP growth is unsustainable over the long term because of a shortage of skilled workers. To sustain that growth rate it will have to come from increased government debt (spending) or inflation. The most likely scenario is inflation.
  • As the economy grows, wages will outpace profits because of increased demand, wages, and entitlements (lowering profits).
  • The current administration is pro-business. Mr. Ablin seemed to give a nod of approval to most of President Trump's proposed policies. He did say that trade tariffs will be disruptive, and the U.S. needs immigrants to fuel economic growth. 

Stock Market

  • The S&P 500 PE Ratio equals 26.89 (March 1). Average PE since the 1870s is approximately 15.64.
  • Valuations in the stock market are pricey compared to historical averages, and when gauged against fundamentals, like earnings and revenues.
  • Optimism and exuberance are driving the market valuations up.
  • PE ratios have been shown to be a poor guide to market timing. Companies with high projected future earnings will trade at higher PE ratios. Plus it's a lag indicator; earnings typically fall well before prices.
  • The bond market is more reasonably priced. The S&P earnings yield is one percent higher than the 10-year triple-B bond yield.
  • Domestic market highest growth potential is in small, mid-cap, and emerging markets.


  • Money is expanding faster than nominal economic growth. This is bullish.
  • The dollar is overvalued against currencies in many of its developed market partners’, making U.S. goods more expensive.
  • China’s yield advantage over the U.S. has widened over the last several months, suggesting dollar weakness over the Yuan.

National Debt

  • President Trump is not that concerned about national debt.
  • It will rise because of tax relief, an increase in entitlements, and infrastructure spending.

This is a cherry-picked selection of my notes. 

If you'd like to discuss any of these topics, and how they might specifically impact your business contact me at 847.989.0513 or

Best regards,

Bonita Richter, MBA
Profit Strategies