Are We Heading Back to the Roaring 20s?

American author Mark Twain is often attributed as the source of the quote (apocryphally, it seems), “History doesn’t repeat itself, but it often rhymes,” which rings true for the many parallels between the 2020s and the century-ago decade. First, there’s the pandemic. The years 1918–1919 saw the ending of the First World War and the pandemic commonly known as the Spanish Flu (which did not originate from Spain). Photos from that era look all too familiar today, with citizens being required to wear masks in public.

The ending of the Great War and the mitigation of the pandemic unleashed a period of exceptional economic and cultural growth in the US, referred to as the “Roaring 20s.” US real GDP grew by 42 % from 1920 to 1929 (a 4.0 % CAGR), and the US grew into a national, consumer society. Due to nationwide advertising and the proliferation of chain stores, Americans across the country bought the same goods and shopped at many of the same stores.

There were also many developments on the cultural front. Returning US soldiers had experienced a bit of continental European life during the war and yearned to have fun again, which led to the loosening of some cultural constraints back home. Despite the ratification of laws prohibiting the consumption of alcohol (prohibition existed from 1920 to 1933), the public continued to consume alcohol, which continued in under-the-radar speakeasies. The decade is also called The Jazz Age, reflecting a major directional change in popular music from traditional tunes to the experimental nature of jazz. Currently, social media has a significant impact on popular culture, which will no doubt continue in the 2020’s. Social media has also dramatically changed how people interact and communicate and is likely to increase its influence further among a geographically fragmented population, having recently become a major force in the political and investing spheres.

The pandemic has shifted many consumer behaviors, with the Roaring 2020s starting at home. Consumption of alcohol at home has increased, as locked-down consumers seek to entertain themselves. Despite increased time spent at home in 2020, the birth rate was essentially flat.

Fashion changed dramatically in the 1920s, accompanying a surge in interest in fashion magazines and the fashion trends of Chanel and other European houses. Women’s attire broke off from its Victorian norms: Female consumers abandoned corsets and began wearing shorter skirts and cosmetics, a style attributed to “flappers.” US women’s more-visible roles in society were accompanied by the receipt of the right to vote in 1920. Several ethnic communities embraced zoot suits, which featured wide-legged trousers and long coats with wide lapels and padded shoulders. Today’s fashions have departed from the traditional hem-length cycles, with younger generations preferring to create an eclectic mix of styles from the decades spanning from the 1960s to recent times, in addition to becoming gender-fluid and more inclusive.

Then came the Wall Street Crash of 1929, which bankrupted investors and put a serious damper on the fun of the Roaring 20s. The Dow Jones Industrial Average fell by a total of 25 % from Black Thursday through the following Black Tuesday (October 24–29, 1929), with many investors buying stocks on borrowed money, receiving margin calls and losing their entire investments. The stock market crash led to the Great Depression, which continued through 1939, in addition to the creation of the US Securities and Exchange Commission to regulate the securities industry.

We have also seen a recent accumulation of wealth. The S&P 500 Index more than doubled from January 2011 to January 2021, growing at a solid 8% CAGR. It expanded by 75 % from its low in late March 2020 to a 52-week high this week, generating significant wealth for investors.

The massive speculation in stocks on margin in the 1920s echoes current events, in which social media-fueled investors incited the mass-buying of certain stocks to create a “short squeeze,” i.e., forcing short sellers to buy shares which creates large spikes in share prices. At the same time, retail (i.e., individual) investors’ trading has surged, returning the power base of investing to normal citizens. Employees working from home and online are able to trade stocks without being under the watchful eye of their employers. As always, opinions vary widely as to whether we are currently in a stock market bubble akin to 1929, yet many analysts believe that we are in the early stages of another bull market.

The experience of the epidemic of 1918 shows that this calamity, too, shall pass. We anticipate that an enormous wave of relief will blanket the world once the vaccines start to kick in and when we will be able to resume our prior activities and habits. We also look forward to a return of live performances and activities, and there is likely an enormous amount of pent-up creativity among performers and artists that waiting to be released, offering the promise of more Roaring 20s.