August 13, 2020

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Stocks could be melting up like they did in the Roaring ’20s, strategist says — we all know what happened next

Stocks could be melting up like they did in the Roaring ’20s, strategist says — we all know what happened next
The Tell Published: Aug. 13, 2020 at 2:19 p.m. ET The 1920s were going swimmingly until they weren’t. Getty Mark Twain once said, “History doesn’t repeat itself, but it often rhymes.” Ed Yardeni, chief investment strategist at Yardeni Research, applied those words to what, for most observers, has to feel like a unique climate for…

The Tell

The 1920s were going swimmingly until they weren’t.


Getty

Mark Twain once said, “History doesn’t repeat itself, but it often rhymes.”

Ed Yardeni, chief investment strategist at Yardeni Research, applied those words to what, for most observers, has to feel like a unique climate for playing the market these days.

But that is not necessarily the case, according to Yardeni.

“We live in interesting, though not unprecedented, times,” he wrote in a blog post. “The Roaring 1920s could be a precedent for the Roaring 2020s.”

For instance, he compared the coronavirus pandemic to the 1918 Spanish Flu, which killed an estimated 50 million people and infected some 500 million around the world.

“The good news is that the bad news during the previous precedent was followed by the Roaring 20s,” Yardeni wrote. “So far, the 2020s has started with the pandemic, but there are plenty of years left for the prosperous 1920s to become a precedent for the current decade.”

The key to the next boom, as it was in the 1920, will be technology-enhanced productivity.

“Today’s doomsters could be confounded by biotechnological innovations that deliver not only a vaccine for COVID-19 but for all coronaviruses, Yardeni said. “Scientists are investigating an array of approaches to fight COVID-19. Hopefully, beyond finding a cure or a vaccine, one of the beneficial outcomes of all this research will be that scientists learn many more ways to combat illnesses in general and viruses in particular.”

Add this to robotics, AI, nanotechnology, blockchain, electric vehicles, quantum computing, etc., and, as Yardeni suggests, we could be looking at a historic transformation, much like the advances in transportation, manufacturing, electricity and plumbing that ensued 100 years ago.

What’s it all mean for the stock market?

Well, as Yardeni told clients in a note Wednesday, he sees a strong finish to the year for the S&P 500 thanks to historic stimulus and a resilient bullish trend. The buying will spill over into 2021, where the S&P could end the year with a double-digit pop, he predicted.

“The 1920s ended with a stock-market meltup followed by a meltdown,” he said. “The 2020s may already be seeing a meltup, begun on March 23.”

If history does, indeed, rhyme, this rally has lots of room to run, but investors might want to mark their calendars for the fall of 2029.

Meanwhile, the stock market was mixed in Thursday’s trading session, with the Dow Jones Industrial Average
DJIA,
-0.28%

and the S&P 500
SPX,
-0.20%

losing some ground as the tech-heavy Nasdaq Composite
COMP,
+0.27%

edged higher.

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