17 Mar The Roaring Twenties – Will History Repeat
The 1920’s in America was a very prosperous time. So prosperous we now know it as the Roaring Twenties. It was a time of huge economic expansion and increasing wealth. Life improved significantly for the majority of Americans.
Why? What was happening to their economy to cause such prosperity?
Well, the main reasons for America’s economic boom in the 1920s were:
- Technological progress
- The electrification of America
- New mass marketing techniques
- The availability of cheap credit
- Increased employment
All of which in turn created wealth for employees that led to a huge number of consumers.
Between 1920 and 1928 the Dow Jones Industrial Average tripled in value.
It was a great time to be a stock investor.
The Roaring Twenties happened 100 years ago, but I believe history is about to repeat and we are going to have another Roaring Twenties period. In fact, it has already started.
The similarities between today and the 1920s are extraordinary.
The 1918 influenza pandemic was the most severe pandemic of the 20th Century. It was caused by an H1N1 virus with genes of avian origin. Although there is no universal consensus regarding where the virus originated, it spread worldwide in 1918-1919. The number of deaths was estimated at 50 million.
During this Pandemic the Dow Jones Index actually gained 10.5% in 1918 and 30.5% in 1919. In fact, 1919 stands as the 9th best year for the Dow ever.
During the Covid-19 pandemic of 2020 the Dow Jones index generated a total return of 9.7%. That is very close to the 10.5% of 1918.
If history is anything to go by, with a 30.5% return in 1919, what could 2021 deliver to us? I suspect 2021 is about to relegate 1919 to the 10th best.
Back to the similarities.
The 1920s was a time of great innovation in technology. New industries popped up and mass production techniques meant that goods could be produced more quickly and in greater quantities.
The Covid pandemic in 2020 is said to have brought forward 5 years’ worth of technological advances. Those advances will lead to higher productivity and hence profits for companies.
The 1920s also saw cheap credit. That gave consumers the ability to go out and purchase more products.
In 2021 we have a situation where consumer savings are high. Being locked up does wonders for your wallet apparently. But it also creates pent-up demand once consumers are allowed to go back out again. Add the massive stimulus cheques (probably too much) and zero interest rates and you have an environment that could boom. I would not be surprised to see 8% GDP growth this year.
In the 1920s all that prosperity meant job creation, which meant more people had disposable income to spend which empowered the consumer. Businesses sold more so needed more staff….you can see how this merry-go-round continues.
In 2021 we have a Federal Reserve that has stated their goal is to get back to full employment. They will continue with their easy money policy until employment is back to pre-Covid levels.
The merry-go-round of the 1920s is about to repeat in the 2020s
One day last week the US vaccinated 2.9million people in 24 hours. They are rolling this out faster than a greased cheetah.
Life will get back to normal very soon. 7 states have already dropped all Covid-19 restrictions. Business and life in these states is returning to normal.
There will be a rush of spending as consumers break their drought.
Businesses will make a lot of profit.
We saw it happen 100 years ago. The same thing will happen again for the same reasons. Forget the roaring 1920s. We are about to have the ROARING 2020s!
We have cheap money, technological advances and a goal of maximum employment.
Stock investors will do extremely well, just as they did back then.
So how do you take advantage of this?
The best way I know is to invest in the fastest-growing companies in the US. This is exactly what our Top 30 Trading Strategy attempts to do. So far (as at March 16th) for 2021 the strategy is up 30.7%
If I am right about this year being an absolute ripper, then this is just the start. If you want to follow our Top 30 strategy you can learn more and sign up at this link
Stay Long.
Matthew Jones
Director Capital 19
Performance and profit calculations are theoretical and calculated by Capital 19 and do not reflect actual investments in the companies mentioned they also do not include the costs of commission or the effects of exchange rates or taxes. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. Past performance is not a reliable indicator of future performance.