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Why has the stock market been such a glorious investment in recent decades? It’s more about workers’ declining power than actual economic growth, according to a team of U.S. researchers.

Share prices surged over the past generation primarily because investors got a bigger share of the economic pie, according to Daniel Greenwald of the Massachusetts Institute of Technology, Martin Lettau of the University of California at Berkeley and Sydney Ludvigson of New York University.

“High returns to holding equity over the postwar period have been in large part attributable to good luck,” the researchers argue in a new working paper, How the Wealth was Won, published on Monday by the National Bureau of Economic Research.

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The biggest part of investors’ recent good luck was a series of unplanned shifts in how economic “rents” – that is, excess returns above normal levels – were distributed to various contributors. Less of those rents are now going to workers and more to investors.

The findings put a question mark over the conventional wisdom that stocks will always beat competing investments by a wide margin. Maybe that is not quite so certain after all.

Even if the pendulum never swings back strongly in labour’s direction, it is possible that the shift in favour of shareholders has gone as far as it can go. If so, future returns from stocks are likely to be lower than most investors expect.

To be sure, any attempt to project long-term market trends is open to debate, but the researchers offer an intriguing perspective on why stocks have performed better than the overall economy for several decades.

They calculate that the value of shares in non-financial U.S. companies grew at an average after-inflation clip of 8.4 per cent a year between January, 1989, and December, 2017. In contrast, the real value of what was actually produced by these companies expanded only 4.5 per cent a year on average.

In plain English, this means the stock market soared while the real economy plodded ahead. “The upshot of these trends is a widening chasm between the stock market and the broad economy,” the researchers write.

In their paper, they attempt to put numbers on what caused this gap between Wall Street and Main Street. They figure that real production gains explained about 23 per cent of the market’s gains since 1989. Falling interest rates and increased risk tolerance among investors each accounted for an additional 11 per cent of shares’ ascent.

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The biggest single reason for the sizzling performance of stocks was a shift in how the rewards from production were divvied up among various contributors, according to the researchers. They conclude that 54 per cent of the market increase since 1989 reflected trends that “persistently reallocated rents to shareholders and away from labour compensation.”

Their paper doesn’t try to explain this shift, but it is likely to reflect the persistent decline in union power as well as technological shifts that have done away with many factory and clerical jobs.

For investors, the worrisome question is what it means for returns in the future. As the new paper points out, the trends that supercharged share prices between 1989 and 2017 aren’t always in evidence. Between 1952 and 1988, the stock market created less than half as much wealth as it did during the later period. Nearly all of the market gains between 1952 and 1988 reflected real economic growth, rather than a shift in who got what.

If stock market gains were to once again hinge on growth in the economy, future returns are likely to be lacklustre. The Canadian and U.S. economies have struggled to generate strong expansions since the financial crisis. That may change, but barring a sudden outburst of productivity gains, an aging population is likely to put a lid on growth prospects.

So what can an investor do? One thought may be to look for companies with low labour costs relative to total expenses, where any resurgence in workers’ pay will have only limited effect on profits. Goldman Sachs recommended just such a strategy in February, based on the notion that tight jobs markets are likely to lead to increased wages. Among its recommended stocks are Mastercard Inc., Paypal Holdings Inc. and Marathon Petroleum Corp.

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