Why Roaring 20s May Be Back for Investors, Economy


  • The Roaring 20s could be back as the stock market and economy show signs of strengthening.
  • The end of a global pandemic, a strong US consumer, and record highs in the stock market are just a few similarities between the 1920s and today. 
  • But while the Roaring 20s ended with a stock-market crash and the Great Depression in 1929, experts say this time is different.

The end of a global pandemic, a strengthening US consumer, and record highs in the stock market.

Today’s headlines sound a lot like the articles that were printed in newspapers across the country during the 1920s, when America was experiencing an economic boom driven by consumer spending and technological innovations following the end of World War I and the Spanish Flu pandemic.

“The parallels are quite similar,” NorthEnd Private Wealth chief investment officer Alex McGrath told Business Insider.

Those similarities have sparked some speculation on Wall Street that America is again heading for a prolonged economic boom that will drive the stock market to new heights, akin to what happened a century ago.

So, are the Roaring 20s actually back?

Market veteran Ed Yardeni of Yardeni Research sure seems to think so, and he says it’s likely to be driven by a surge in productivity that is unlocked by technological innovations.

In a series of research notes over the past few months, Yardeni has argued that adopting artificial intelligence could help boost efficiencies and profits at companies across various industries.

Productivity growth is essential because it can help expand employee wage growth without the negative byproduct of increasing inflation. That would be a Goldilocks scenario for the economy, as the Federal Reserve wouldn’t be forced to limit growth via interest rate hikes, as they attempted to do throughout 2022 and the first half of 2023.

“Artificial intelligence is just one of several technological innovations that are likely to drive the economy during the Roaring 2020s,” Yardeni said in a note over the summer.

We’ve seen this scenario before, where technology helps drive efficiencies and sustained economic growth.

In the 1920s, a slew of technological innovations helped employees increase their efficiency, companies boost profits, and consumers save time. This was unlocked by the widespread adoption of cars, electricity, agricultural machinery, the telephone, the radio, and even household appliances like the refrigerator.

Demand for these new products sparked the creation of today’s consumer credit system, with banks and companies directly offering customers loans and pay-as-you-go arrangements to boost product purchases, not unlike the recent rise of buy-now-pay-later.

The advent of consumer credit further fueled the economic boom of the 1920s, which was characterized by 20% annual returns in the stock market, Infrastructure Capital Advisors CEO Jay Hatfield told Business Insider.

“We do expect that low double-digit stock market returns could persist for the next five to seven years until the next Fed tightening cycle,” Hatfield said. “Sustainable stock market returns are primarily driven by earnings growth, not multiple expansion, so we believe that low teens returns are more likely and sustainable.”

If those gains materialize, the S&P 500 would be trading above 10,000 by 2030, more than double today’s levels.

That thinking lines up with Carson Group’s global macro strategist Sonu Varghese, who said in a note earlier this month that US stocks will be the best investment over the next five years with potential upside of 100%. A sustained rebound in productivity growth was the major bullish factor behind Varghese’s forecast.

Not so fast

But the economy isn’t out of the woods just yet, with some strategists on Wall Street still expecting a recession to materialize in 2024. And that would undoubtedly throw a wrench into the Roaring 20s narrative.

“It is premature to suggest happy days are here again,” US Bank Wealth Management’s chief equity strategist Terry Sandven told Business Insider. “Higher-for-longer inflation and interest rates, the potential for corporate earnings pressures and already-evaluated valuations temper our cautiously optimistic outlook.”

Sandven said he expects more sideways “chop” in the stock market next year, reversing this year’s trend of strong market gains.

McGrath, the NorthEnd CIO, says this year’s trend of strong economic growth could reverse in 2024.

“Economic growth has certainly surprised to the upside in 2023, but that narrative may become more muted as the lingering effects of higher [interest] rates take hold in our country and across the globe,” he said.

A return of the Roaring 20s seems to hinge on what Fed Chairman Jerome Powell will do with interest rates in 2024, combined with how long the consumer and jobs market can remain resilient. 

The spectre of the 1929 Great Depression

According to chief investment strategist Sam Stovall of CFRA Research, the question to ask isn’t whether or not the Roaring 20’s are back. He’s instead wondering if an era of extended prosperity will end with the same thud it did a century ago, when the Great Depression struck in 1929 alongside an 89% plunge in the Dow.

The aforementioned tech advancements and the consumer-credit system that fueled so much growth ended up being double-edged swords.

“We had similar conditions (consumer demand, economic expansion, technological innovations) after World War II. So I guess the real, underlying question is ‘could the US stock market be setting itself up for a 1929-like crash?'” Stovall told Business Insider.

Such a decline would mean complete and utter devastation for investors, consumers, and the global economy.

But Stovall isn’t worried, and stresses that this time is different. He says assorted checks and balances that didn’t previously exist have since been put into place.

“I would say no, because financial market conditions today are very unlike those of the 1920s,” he said. “In fact, we now have regulatory bodies and trading rules in place to avoid such outcomes as we endured in the aftermath of the crash.”

For example, investors can’t buy stocks on 90% margin like they could during the 1920s, Stovall said. 

So while the similarities between today and 100 years ago are uncanny, the consensus seems to be that whatever age of prosperity awaits will stop short of ending in a cataclysmic, 1929-style disaster.

If a true Roaring 20s is upon us, then it’s a great time for stock investors and economists to buckle in and enjoy the ride.


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