Breaking News
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Back to the future: 2020s to echo roaring 20s or inflationary 70s?

EconomyJun 14, 2021 12:47PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
2/2 © Reuters. FILE PHOTO: A screen displays a chart that tracks the Dow Jones Industrial Average on the floor at the New York Stock Exchange (NYSE) in New York, U.S., July 16, 2019. REUTERS/Brendan McDermid/File Photo 2/2

By Dhara Ranasinghe

LONDON (Reuters) -The 2020s have only just begun but there is already a rush to draw parallels with the past, prompted by a belief that COVID-19 will mark a turning point for the world economy and financial markets.

For some, a post-pandemic economic boom accompanied with optimism about the future echoes the 1920s. Others reckon this decade is beginning to feel like the 1970s, as dormant inflation awakens.

Whatever path the decade takes will of course matter for the trajectory of stocks, bonds, currencies and commodities.

"Changes, shifts and dynamics of narratives matter in the formation of long-term expectations and ultimately (market)prices," said Amundi CIO Pascal Blanque.

Here's a look at which decade the 2020s could resemble.

1. 1920s

In the 1920s, technological and scientific advances led to mass production of goods and the electrification of America, alongside booming stock markets and wealth.

Fast forward to the 2020s and the global economy is expected to grow 6% this year, a rate not seen since the 1970s. Stocks are near record highs, and tech valuations at their highest since the late 1990s dotcom peak. COVID-19 appears to be a catalyst for technological change, spurring digital adoption.

No wonder parallels are drawn with the "Roaring Twenties".

The 1920s ended with a stock market slump and economic depression, but economists believe policymakers have heeded lessons from the past and are unlikely to turn off the money taps too fast.

"A lot will come down to the extent to which monetary and fiscal stimulus translates into real productivity and improvement in structural growth rates," said Kiran Ganesh, head of multi asset, UBS Global Wealth Management.

"Then we are in a roaring 20s scenario, but if the investment ends up wasted we are going back to the 2010s ...when it proved very hard to generate growth."

2. 1930s

The chances that the 2020s revisit the 1930s -- when households struggled to recover from a downturn, birth rates fell and inequality fuelled populism -- is a possibility but is not considered the most likely.

Figures quoted by Oxfam show the world's billionaires became $3.9 trillion richer between March and December 2020 even as economies shrank and tens of millions of workers lost jobs.

There are signs governments are trying to narrow yawning disparities.

The world's richest economies back a minimum global corporate tax rate of at least 15%. A $1.8 trillion American Families Plan is expected to lift more than 5 million children out of poverty.

But birth rates are low. The U.S. fertility rate fell and remained below 2.5 in the 1930s. Today, that rate is at record lows around 1.6, below the roughly 2.1 replacement level.

China had a fertility rate of 1.3 children per woman in 2020, on par with ageing societies Japan and Italy. A COVID-led baby bust could further pressure public finances.

3. 1970s

If inflation returns after a long absence, surely the 1970s -- when oil prices soared and U.S. inflation hit double digits -- is a better fit?

Fans of this scenario argue that hefty fiscal stimulus will give inflation in major economies a long-needed boost. BofA estimates, for example, that the U.S. government will spend $879 million every hour in 2021.

Low wage pressure from Asia is also receding as ageing populations squeeze the supply of workers, boosting wages in developed economies.

Bond investors need to be wary if inflation roars back, as do central banks which have not experienced inflationary pressures for decades.

"Many people think we are in the 1930s but I think we will wake up somewhere in the 70s," said Amundi's Blanque.

4. 1980s or even 2010s

Many economists agree the 2020s will mark a break with the "small government" 1980s as public spending increases are sustained to aid the post-virus recovery.

They also think a rerun of the last decade, the 2010s, is unlikely, as governments ditch austerity and embrace a bigger role for the state in the economy.

This all suggests a departure from the 1980s-style neo-liberal policies pursued by Ronald Reagan and Margaret Thatcher, an ideology that has dominated market thinking ever since and shaped the decade after the 2008-2009 financial crisis.

Agreement on a minimum global tax rate is evidence of a possible shift, although it is still early days.

UniCredit chief economist Erik Nielsen said greater state involvement in the economy, whether via direct ownership, regulation or taxation, was a risk to growth but the details of any intervention mattered.

"One thing is clear, however: It'll lead to massive changes in relative growth between sectors and hence in investment opportunities," he said.

Back to the future: 2020s to echo roaring 20s or inflationary 70s?

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (1)
Connecticut Yankee
A_Jaundiced_Eye Jun 14, 2021 2:02PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Go for a repeat of the '70s, the "Days of Malaise."  "Joe" = "Jimmy"; wonderful person, nice guy, but terrible president.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email