• Robert Baharian

The Roaring 20's

History doesn't repeat itself, but it often rhymes. - Mark Twain

Libraries closed, schools, churches, theatres, halls and indoor entertainment venues shut down. Six days later, racecourses and hotels were closed and people on public transport and in public places were required to wear masks. Schools remained closed, and other states implemented similar measures to contain the virus. Movement by public transport was restricted and state borders were closed. Streets were sprayed with the disinfectant phenyl and the public were urged to practice cough etiquette, regular handwashing, ventilation and disinfection. This was 1918, consequences of the Spanish Flu in Australia. And here is the newspaper snippet I found - you can read the article here if you're interested, it's absolutely fascinating.

What followed was something remarkably remote from what anyone had imagined - no different to the events that unfolded during 2020. The 1920s were a period of rapid change and economic prosperity. In the United States, the nation's wealth more than doubled driven by a recovery from wartime devastation and deferred spending, a boom in construction, and the rapid growth of consumer goods such as automobiles and electricity whilst President Warren G. Harding brought back normalcy. The economy boomed. And so too did the stock market. They called it the Roaring 20s.


In today's chart I plot the stock market's performance during the Spanish Flu and the subsequent roaring 20s, which can be seen in red. The stock market rose 500% during the 12 years following the first case before collapsing in 1929 - this is a different story. For comparison, although a little different, I also plotted the performance of the stock market during the Asian Flu crisis and the subsequent 12 years, which you can see in aqua. The stock market more than doubled during this time. Finally, I plotted the performance of the stock market during COVID-19 and subsequent recovery in blue.

It's really early days to make anything out, however, there are so many similarities economically to that of the time during the Spanish Flu. And I am really curious whether we follow a similar path. We are seeing very early signs of a longer-term economic recovery. Inflation is popping it's head out of the woodwork, and it appears as though we've seen the low in long-term interest rates. If this is anything to go by, it appears as though we could be in for a pretty solid run - economically. And it's really hard to see the stock market no doing well under this scenario. Personally, I'm bullish. Am I doing anything vastly different to what I would be otherwise. No, not really. It's still a game of odds - it always was and it always will be. It's about making positive expected return bets. Sure, we're going to have some hiccups along the way, but as we can see in the chart above, we're heading in the right direction. History doesn't repeat itself, but it often rhymes.