Skip to main content
Complete Olympic Games coverage at your fingertips
Your inside track on the Olympic Games
Enjoy unlimited digital access
$1.99
per week for 24 weeks
Complete Olympic Games coverage at your fingertips
Your inside track onthe Olympics Games
$1.99
per week
for 24 weeks
// //

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 postpandemic 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.

Story continues below advertisement

“Changes, shifts and dynamics of narratives matter in the formation of long-term expectations and ultimately [market] prices,” Amundi chief investment officer Pascal Blanqué said.

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

1920s

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

Fast forward to the 2020s and the global economy is expected to grow 6 per cent this year, a rate not seen since the 1970s. Stocks are near record highs, and tech valuations at their highest since the late 1990s dot-com 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 policy makers 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.

Story continues below advertisement

“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.”

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 US$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 per cent. A US$1.8-trillion American Families Plan is expected to lift more than five 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.

Story continues below advertisement

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

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 hefty fiscal stimulus will give inflation in major economies a long-needed boost. BofA estimates, for example, that the U.S. government will spend US$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 seventies,” said Amundi’s Mr. Blanqué.

Story continues below advertisement

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 postvirus 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 2008-09 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 through 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.

Story continues below advertisement

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies