Can This Be the New Roaring 20’s?
Market Crunch Time Rich Kasparian Blog January 9, 2020
Can This Be the New Roaring 20’s?
In the 1920’s U.S. prosperity soared as the manufacturing of consumer goods increased. Washing machines, vacuum cleaners, and refrigerators became everyday household items in this era. Sixty percent of families purchased a radio. Most of them used expanded credit offered by a booming banking industry. The airline industry literally took off. In 1925, the Kelly Act authorized airmail delivery and in 1926, the Air Commerce Act authorized commercial airlines. From 1926 to 1929, the number of people flying in planes increased from 6,000 to 173,000. The auto industry also expanded due to Henry Ford's mastery of the assembly line which lowered Ford's price 80% between 1909 and1929. A Model T car cost $300 and more families could buy on credit. In the decade, 26 million cars were registered. The expansion fueled gas stations, motels, and restaurants to pop up everywhere to service the new age of car drivers. The highest marginal tax rate was 73% in 1920. When Calvin Coolidge became president in 1923 his motto was "The business of America is business." The stock market began a six-year bull market and the top tax rate was lowered little by little in 1924 and down to 25% in 1925. Thus, the Roaring 1920’s!
So where are we now? We have created almost 500,000 manufacturing jobs in the last couple of years. Manufacturing jobs are growing at the fastest rate in more than three decades. More Americans are now employed than ever recorded in our history. Almost 6.3 million Americans have been lifted off food stamps in the last three years. We are finally energy independent and coal exports have increased by over 80% percent; U.S. oil and natural gas production recently reached all-time highs. The United States is now a net natural gas exporter for the first time since 1957. Youth unemployment has recently hit the lowest rate in nearly half a century. In fact, almost 7 million jobs have been created and unemployment is at all time lows for almost every demographic. Wages have increased for the first time in 10 years and median Household Income has hit its highest level ever recorded. Tax cuts have help propel the economy whereby U.S. companies have repatriated almost 1 trillion dollars(with a “T”) in investments back into the US economy. The USMCA is replacing NAFTA which will help the farmers and a soon to be bilateral deal with the UK should propel things further. My belief has always been that any deal with China should create a strong trajectory for the economy and certainly the market.
In 2020 the iPhone may have replaced the washing machine of the 1920’s and computer driven cars will replace the Model T but all economic and market indicators seem to suggest a new “Roaring 20’s”.
The opinions expressed in this material do not necessarily reflect the views of LPL Financial. This is for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that any strategies that may be promoted will be successful. Investing involves risk including loss of principal_
Resources
The Balance- “1920’s Economy. What made the 20’s Roar?” Kimberly Amadeo- January 3, 2020
EIA.gov- U.S. Energy Information Administration- March 27, 2019
Whitehouse.gov- “Fact Sheet” December 31,2019