Investors Bet On Roaring ’20s Environment But It Set Up The Great Depression

Investors Bet On Roaring ’20s Environment But It Set Up The Great Depression

Roaring '20s
Trader Thomas Lee works on the floor of the New York Stock Exchange, Feb. 28, 2020. (AP Photo/Richard Drew)

Investors are betting that a post-pandemic spending boom will boost business performance as economies reopen and people’s lives resume normalcy, similar to what happened in the “Roaring 20s” leading to the Great Depression that left many low-income Americans poorer.

Companies where face-to-face is the norm, including travel, restaurants and offline shopping businesses, are receiving more attention from the world’s top money managers. It’s a sign that the coronavirus pandemic that bedeviled the globe for more than a year is showing signs of dissipating as vaccine rollouts go into overdrive.

Travel-related stocks such as Marriott, Airbnb, Six Flags and Trip.com have gained 11-to-41 percent so far this year on covid recovery hope. Analysts expect them to gain further as the economy reopens.

“A lot of people are estimating this is really going to lead to a new ‘Roaring 20s’ theme,” said Swetha Ramachandran, the manager of GAM’s Luxury Brands Equity fund, in a Bloomberg interview. She suggested that there is growing concern post-pandemic spending will hark back to the excesses of the 1920s.

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Increased spending by euphoric consumers after the 1918 flu pandemic and World War I led to a time of immense economic prosperity, but for most Americans, the riches did not reach them during the Great Depression.

Expecting “a lot of peacocking”  from consumers, investors have, since late 2020, piled into cyclical stocks that benefit from an economic rebound and pulled back from high-valued technology stocks, Ramachandran said.

The U.S., which has suffered heavily from the covid-19 pandemic, is at the forefront for vaccinations with more than 150 million people already vaccinated in the first 75 days.

Just like in the 1920s, the coronavirus pandemic has exposed income inequalities in the U.S. even as it enters a post-pandemic boom, according to JP Morgan boss Jamie Dimon.

Dimon said in an annual letter to shareholders that the economy is on the edge of a “Goldilocks moment,” where expanding vaccinations, high savings rates and the Biden administration’s massive stimulus bill could trigger a strong recovery lasting well into 2023.

In the Roaring ’20s, many Americans owned cars and radios for the first time during a period of mass production and prosperity. The Great Depression of 1929 devastated the U.S. economy. A third of all banks failed, unemployment rose to 25 percent, and homelessness increased. Housing prices fell 67 percent, international trade collapsed by 65 percent, and deflation rose above 10. It took 25 years for the stock market to recover.

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