Why We Aren’t Repeating The Roaring 20’s Analog

No. We are not repeating the “Roaring 20’s” analog. Ben Carlson had a recent post asking if the “Roaring 20’s” are already here? As his chart shows below, there are certainly some similarities between 1920 and 2020 given the recent “pandemic shutdown” driven recession.

Roaring 20's Analog, Why We Aren’t Repeating The Roaring 20’s Analog

However, what Ben missed were the differences both economically and fundamentally between the two periods.

Let me preface this article by stating that I don’t like market analogies, particularly when they are with early market eras like the ’20s. The population of the country was vastly smaller, the financial markets were rudimentary at best, there were few big players in the markets, and the flow of information was slow.

1920 Was The Bottom

Ben makes an important observation to start his post.

“Yet coming out of that awful period, America experienced an unprecedented boom time the likes of which this country had never seen before.

The 1920s ushered in the automobile, the airplane, the radio, the assembly line, the refrigerator, electric razor, washing machine, jukebox, television and more. There was a massive stock market boom and explosion of spending by consumers the likes of which were unrivaled at the time. After the immense pressure of the Great War, many people simply wanted to have fun and spend money.”

Ben is correct, the ’20s marked the start of a period of marvel and rapid change. However, his chart above misses some important events starting in 1900 leading to 20-years of negative returns.

  • Panic of 1907
  • Recession in 1910-1911
  • Recession in 1913-1914
  • Bank Crash of 1914
  • World War I ran from 1914-1918
  • Spanish Flu Pandemic 1918-1919
  • Economic Depression in 1920-1921
Roaring 20's Analog, Why We Aren’t Repeating The Roaring 20’s Analog