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The Roaring Twenties Weren’t so Great for 777彩票地址. Why This Decade Will Be Better.


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Six costumed jazz girls performing with mandolins at a revue show. Photograph by General Photographic Agency/Getty Images

History doesn’t repeat, but it rhymes, the saying goes. That means investors can look at the era of jazz music, flapper dresses, and cloche hats for clues about what the current decade holds for stock prices.

Of course, too much similarity would be a bad thing. Investors don’t want a repeat of 1929, when the market dropped about 13%, including a 28% plunge over two days in October. But 2029 is still far away, at least in investing terms.

Based on history, the future appears bright for the market. There are important parallels between the 1920s and today. Both decades have , technological innovation, and deregulation; three factors that tend to boost stock prices.

777彩票地址We can expect to beat the Roaring Twenties over the next 10 years. Returns back then looked good at the time, but they can’t hold a candle to the modern market.

As the 1920s opened, the market was coming off a decade when the S&P 500 dropped about 1% a year on average, so the 9.4% average annual gain in the index over the 10-year span looked great. But the 1950s, 1980s, 1990s and, of course, the Modern Teens, the decade just completed, all posted better average annual changes in the S&P 500.

The 1990s was the winning decade for stocks, with an average annual gain of more than 15%, excluding dividends. The decade brought federal budget surpluses——and relative geopolitical calm. U.S. after the close of the Cold War. The 1990s were gentler times.

Back in the 1920s, technology and taxes helped boost the market. Things such as cars, electricity, radios, and telephones came into wider use and created new business opportunities. Taxes plunged at the same time, dropping from a top marginal rate of 73% on earnings above $1 million in 1920 to a highest marginal rate of 24% on income above $100,000 by 1929.

777彩票地址Both are still factors today. President Donald Trump lowered the top tax bracket from about 40% to 37%, as well as reducing corporate taxes. In terms of technologies, investors can still look at phones and cars. Today’s cars try to drive themselves and a is thousands of times faster than the computer that took astronauts to the moon, with millions of times the memory.

The Massachusetts Institute of Technology lists each year. In 2019, it included robot-linked technologies, health care, meatless burgers777彩票地址, and safer nuclear power, as well as artificial intelligence, or A.I.

It is a bold call to plow money into new nuclear power. But shareholders can invest in A.I. through companies such as Alphabet (ticker: GOOGL) and Microsoft (MSFT). And, of course, there is one publicly traded alternative-meat producer: Beyond Meat (BYND).

Some of the tech MIT cites is still in the development stage, but there are other innovations investors can focus on. “We believe 5G [wireless technology is] the most transformational tech trend along with cloud for the next decade,” Wedbush analyst Dan Ives told Barron’s. “One trillion dollars each will be spent on 5G and cloud over the next decade.”

That is good news for companies such as Amazon.com (AMZN), the e-commerce and web services giant, as well as other, smaller, 5G suppliers like Keysight Technologies (KEYS).

Of course, the Roaring Twenties ended with a thud and the onset of the Great Depression. Blame the government.

“Low inflation, tax cuts and an accommodative Fed supported the market in the 1920s, obscuring the asset bubble forming beneath the surface,” wrote Michael Arone, chief investment strategist for State Street’s SPDR exchange-traded fund business. He sees the same setup in this decade, adding “as we look to the election year of 2020, investors will have to grapple with [risks] including the impact of the constant political roaring that continues to brutally divide the country.”

777彩票地址Fortunately, no one expects the Federal Reserve to tighten monetary policy as the economy weakens, as it did in . That should take the worst outcomes—those that brought us the Depression and, arguably, World War II—off the table this decade.

For better or worse, modern central bankers have made markets less volatile. During the Roaring Twenties, yearly changes in the S&P 500 ranged, very roughly, from down 20% to up 40%. The 60 percentage-points spread is about double the differential in the decade just completed.

Another potential concern for investors is the starting point for markets. The S&P 500, the Dow Jones Industrial Average, and the Nasdaq Composite are all near record highs. The Roaring Twenties, by contrast, followed the post-World War I recession.

But that doesn’t mean this decade is doomed. Don’t forget. Two of the best decades for investors came back to back, in the 1980s and 1990s.

What could make the Modern Teens and Twenties look like that 20-year investing bonanza would be easing geopolitical tensions. Although concern about war has risen following the of a senior Iranian general on Thursday, we can dream of a comprehensive trade deal with China777彩票地址 and a more stable Middle East.

777彩票地址Either would be a powerful stimulus for stocks and bring more people into the modern economy. Don’t forget, Iraq invaded Kuwait in August 1990.

Write to Al Root at allen.root@dowjones.com


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