How Will the 2020s Compare to the Roaring Twenties?

By John Del Vecchio  |  December 26, 2019

Whew! What a decade. As the 2010s come to a close after a massive stock market rally and record-breaking economy, how are the 2020s likely to compare to the Roaring Twenties of a century ago?

Not much will be similar.

During the Roaring Twenties, the Dow Jones rocketed up six-fold. The U.S. economy soared. Otherwise smart people, such as famed economist Irving Fisher, claimed that “stock prices had reached what looks like a permanently high plateau.”

All that right before the market imploded.

It’s déjà vu. This could happen all over again.

The U.S. economy is performing well. The job market is very tight. So tight that when I went to college 25 years ago, it was unthinkable that unemployment would be 3.5%.

That’s crazy.

Negative interest rates are, too.

It’s a Strange World We Live In

Never once did it dawn on me that savers would pay a government to hold their money for them.

There’s been a bit of pushback recently though.

According to the Financial Times, the selloff in global bond markets has shrunk the amount of negative yielding debt by $6 trillion since the summer peak. Rates could stay negative for a long time. It’s hard to slap governments on the wrist when they’ve had their hand in the punchbowl for a decade now.

Low rates have also caused companies to borrow money to buy back stock. Stock buybacks have been a massive driver of the stock market since the bottom early 10 years ago.

The buybacks have started to slow. In 2019, they are down double digits from 2018.

However, their contribution to earnings will be the greatest in this 10-year bull move.

Meanwhile, revenues and profit margins are starting to stagnate and shrink.

What Does All This Mean for Stocks?

From here on out, it will be harder and harder to move the needle that pushes stock prices higher. The 2020s could end up being a lost decade.

The legendary investor Jeremy Grantham is not always right. His timing can be off. But he nails the big, secular moves. Here’s a chart of his expected returns:

Not good… unless you consider emerging markets.

Developed markets like the U.S. are likely to see negative returns over the seven-year forecast period. To put this in perspective, the seven-year -4.4% annual real return in large U.S. stock implies a complete beatdown.

Bonds don’t look great either.

Everything is inflated.

Risks is up for little return.

That said, there will be pockets of the market that do well.

Take Hidden Fortunes, for example. I have focus on two stocks each month.

One recommendation has a juicy yield to offer protection in a low yield market.

The other offers the potential to have massive gains regardless of market direction.

These under-the-radar companies with awesome technologies that could realize tremendous value, resulting in 500%, 1,000%, or even 2,000% gains — it’s entirely possible.

With profits like that, it isn’t going to matter what large caps do over the next seven years.

So, do yourself a favor and start off the new year — and the new decade — the right way by trying Hidden Fortunes, risk-free! Click here to learn more.

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John Del Vecchio

John Del Vecchio is the author of the bestselling book, Rule of 72: Compound Your Money and Uncover Hidden Stock Profits and What’s Behind The Numbers: A Guide To Exposing Financial Chicanery And Avoiding Huge Losses In Your Portfolio.

As the in-house stock market guru and forensic accountant for Dent Research, John stood on the shoulders of the great David Tice, James O’Shaughnessy and Dr. Howard Schilit, and built a framework of algorithms and a multi-factor grading system that has made him one of the more successful short-sellers around.

John is also the executive editor of our Hidden Fortunes newsletter and our trading service Small Cap All-Stars.

He graduated Summa Cum Laude from Bryant College with a B.S. in Finance and was awarded Beta Gamma Sigma honors. He earned the right to use the Chartered Financial Analyst designation in September 2001.MORE FROM AUTHOR