Shares could melt as they did in the Roaring 20s, says strategist – we all know what happened next

THE COUNT

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The 1920s went by until they were not.

Mark Twain once said, “History does not repeat itself, but often rhymes.”

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Ed Yardeni, chief investment strategist at Yardeni Research, applies those words to what, for most observers, should 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 unusual, times,” he wrote in a blog post. “The Roaring 1920s could be a precedent for the Roaring 2020s.”

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

“The good news is that the bad news in the previous presidency was followed by the Roaring 20s,” Yardeni wrote. “So far, the 2020s have begun with the pandemic, but there are many years left for the booming 1920s to become a precedent for the current decade.”

The key to the next boom, as it was in the 1920s, will be improving the productivity of technology.

“Today’s doomers could be surprised by biotechnological innovations that not only provide a vaccine for COVID-19 but for all coronaviruses,” said Yardeni. “Scientists are researching a variety of approaches to combat COVID-19. Hopefully, beyond finding a cure as a vaccine, one of the beneficial outcomes of all this research will be that scientists will learn many more ways to fight diseases in general and viruses in particular. “

Add this to robotics, AI, nanotechnology, blockchain, electric cars, quantum processing, etc., and as Yardeni suggests, we could look at a historic transformation, such as advances in transportation, manufacturing, electricity, and plumbing. 100 were years ago.

What does it all mean for the stock market?

Now, as Yardeni clients said in a note Wednesday, it sees a strong finish to the year for the S&P 500 thanks to historical stimulus and a fourth bullish trend. The purchase goes over to 2021, where the S&P could end the year with a bilingual pop, he suggested.

“The 1920s ended with a meltup of stocks, followed by a meltdown,” he said. “The 2020s can already see a meltup, starting on March 23.”

As history may suggest, this rally has plenty of room to run, but investors may want to mark their agendas for the fall of 2029.

Meanwhile, the stock market was mixed in Thursday’s trading session, with the Dow Jones Industrial Average (DJIA) and the S&P 500 (SPX) losing some ground as the tech-heavy Nasdaq Composite (COMP) rose higher.

Gallery: Big financial bubbles that burst spectacularly (Lovemoney)