The Productivity Mirage: Markets Without Workers
3 min read
A third of my posts this year will land on a weekend, and honestly, I like it that way. A Saturday post forces me to think a day ahead, and that little bit of structure makes me feel more productive. Whenever I sit down early, something else always comes out of it—a trade idea, an angle, a client call, a connection I wouldn’t have seen during market hours. Funny how that works: when you actually enjoy what you’re working on, productivity shows up without you forcing it.
And that’s the perfect setup for where we are right now.
Markets have wobbled this week: the S&P 500 is down roughly 1.1% and the Nasdaq about 2.4% as tech names continue to sell off. Hiring is flat and participation remains weak, yet corporate accounts keep pointing to productivity gains. That gap—strong numbers on paper while labor availability softens—is what I call the productivity mirage: headline efficiency that looks real until you examine what’s underneath.
The Mirage: When Output Rises Without Labor
Traditionally, productivity reflects real work performed more efficiently. Today, it reflects something else:
Automation replacing labor input
AI absorbing mid-tier tasks
Corporate cost-cutting disguised as “efficiency”
An economy increasingly run on software, not workers
It’s not that we’re working smarter.
It’s that fewer workers are counted.
GDP grows on paper. Corporate profitability rises. But the foundations get weaker.
This distortion is important for investors, because markets react to narratives long before reality sets in.
When Markets Climb Without Workers, Allocation Matters More
In a labor-light environment, equity markets can behave like they’re running on autopilot. Earnings look good — until they don’t. Productivity looks high — until revisions come in. Companies look healthy — until cost-cutting hits limits.
For long-term investors, this creates a two-speed environment:
The surface level:
Markets continue rising because reported productivity looks strong.The underlying level:
Fragility grows as fewer workers support more economic weight.
This is where portfolio design becomes the difference between surviving and outperforming.
The Strategy: Lower Beta, Higher Clarity
When markets float on distortions, you don’t chase the illusion.
You anchor the portfolio in assets that still make sense when the mirage evaporates.
The approach — maintaining a portfolio beta under 1 and attempt to outperform the S&P 500 on a risk-adjusted basis by reallocating away from the dominating companies of the index — is built for this moment.
Here’s how it fits:
1. Favor sectors tied to real output, not narrative output
Industrials, materials, commodities, and energy remain grounded in physical demand, not productivity headlines.
2. Use hedges with intrinsic value
Gold and precious metals don’t need productivity to justify their price.
They need uncertainty — and uncertainty is abundant.
3. Keep equity exposure intentional
You don’t need to be out of the market.
You need to be in the parts of the market that still function even when labor data is noise.
4. Allow liquidity to build ahead of 2026 repositioning
Since my plan is to reduce stock holdings in Q1 2026, then today’s approach is about controlled positioning, not aggressive accumulation.
This Isn’t Doom — It’s Discipline
The story of 2025 isn’t that the economy is collapsing.
It’s that it’s being held up by forces that won’t last forever:
delayed data
delayed consequences
delayed recognition
And as Washington reopens this week, the backlog of information — jobs reports, productivity revisions, FOIA updates — will finally hit the tape. Some numbers will reassure the market. Others will expose the cracks beneath the mirage.
Investors who understand the disconnect between reported productivity and real economic function will be prepared.
Investors who don’t will chase headlines, not fundamentals.
Final Thought: In a Mirage, Vision Matters More Than Speed
Markets without workers won’t stay illusionary forever.
But while the mirage lasts, the advantage belongs to the investor applying structure, discipline, and strategic allocation — not emotion.
That’s the essence of the approach:
Stay invested.
Stay under beta 1.
Let real assets balance equity risk.
Position ahead of structural shifts.
Because when the productivity mirage clears, you want to be standing where the real value actually is — not where the illusion pointed you.
If the productivity mirage tells us anything, it’s that the world can look stable right up until it isn’t. Automation, layoffs, policy swings—none of it waits for anyone to get ready. But your financial strategy can.
At BMG, I help clients build portfolios that don’t just react to the next headline—they anticipate it. If you’re looking to position yourself for 2026 and beyond, let’s talk. Your future stability shouldn’t depend on who’s hiring or how fast the machines get smarter.
