by Gary Alexander

May 5, 2020

Pandemics might be on a 50-year cycle. Everyone has heard of the 1918-19 pandemic by now, but there was also a severe 1968-69 pandemic that cost 100,000 American lives – mostly those over age 65.

According to the CDC, the H3N2 (“Hong Kong”) virus entered the U.S. in September 1968 and killed almost twice as many Americans as died in the Vietnam War, but the news media hardly noticed the killer bug. There were no state or local lockdowns and the stock market remained firm during the flu’s peak.

Dow Jones Industrial Average Percent Change during Flu Pandemic Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

In 1920, the stock market corrected long after the flu bug left America in early 1919. It had nothing to do with the flu epidemic. The 1920 depression resulted from unemployment, caused by returning troops and labor unrest, and high inflation. Like the Federal Reserve under Paul Volcker in 1979-82, the Fed of 1919-22 was determined to slay the high war-fueled inflation rate, by raising the Fed’s Discount Rate.

Consumer Price Index Inflation Rate Table

Overnight Broker Lending Rates and Fed Discount Rate Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

The Fed raised the Discount Rate from 4% to 7% from late 1919 to mid-1920; source: New World Economics

Think of the current Fed and then flip the scenario 180 degrees. The 1920 Fed (like Volcker’s 1980 Fed) raised interest rates to kill inflation. From 1917 to 1920, prices rose 83.5%, but from 1921 to 1933 prices declined. As in 1981-82, the cost was a deep repression running 18 months, January 2020 to July 1921.

Economic statistics were primitive then. Some say the GDP fell 2.4%, others say -6.9%. I’ll go with Jim Grant’s short summary in his 2014 book, “The Forgotten Depression, 1921: The Crash That Cured Itself.”

“The nation’s output in 1920-21 suffered a decline of 23.9% in nominal terms, -8.7% in inflation- (or deflation-) adjusted terms. From cyclical peak to trough, producer prices fell by 40.8%, industrial production by 31.6%, stock prices by 46.6% and corporate profits by 92%.”

The Dow Jones Industrials fell by 33% in 1920 after rising by over 30% in 1919. Sound familiar?

The Dismal First-Quarter GDP Figures are Now Rolling in

The 2020 GDP toll is just starting to come in. The coronavirus did not escape China and invade Europe and America until late February – only impacting March statistics – but quarterly totals show significant declines. As of the end of April 2020, preliminary GDP figures started appearing for the first quarter:

  • On April 16, China reported a year-over-year decline of -6.8% in their first-quarter GDP:

China's Economic Growth Bar Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

  • On April 29, the Bureau of Economic Analysis reported that the preliminary U.S. GDP for the first quarter of 2020 fell at a 4.8% annual rate, the worst quarter since 2008.

United States Gross Domestic Product Bar Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

  • April 30, Eurostat reported a -3.8% seasonally adjusted GDP decrease in the euro area (and -3.5% in the EU) in the first quarter vs. the previous quarter, a 14.4% annual rate of decline.

Now, let’s return to 1920. After the dismal deaths from World War I (117,466 soldiers died from the U.S. forces and over 10 million worldwide) and the flu epidemic (675,000 in the U.S. and 50 million globally), we endured a recession that launched the not-yet-roaring 1920s. Wartime inflation unwound viciously with an annual rate of deflation of between 13% and 18% (estimates vary). Unemployment peaked at around 10%. But stocks and the GDP rose rapidly in the nine years that followed – the Roaring 20s.

Real Gross Domestic Product Change Table

In short, it took a decade of pain to earn the Roaring 20s – two two-year recessions (1910-14), then a closed market for about nine months, a World War, a global flu epidemic, and a deep depression. Then came five years of 20% or more market gains and four years of 5% or more GDP gains (+13% in 1923).

What it Took to get to the Roaring 20s Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Stocks Now Anticipate 2021 Economic Growth

Stocks soared in April 2020, enjoying their best month since January 1987, when both the Dow and S&P rose over 13%. In April 2020, the S&P 500 gained 12.7% while the Dow rose 11.1%. Besides being the best month since 1987, it was the third-best monthly gain for the S&P 500 since World War II.

Best Standard and Poor's 500 Months Since 1950 Table

In the 1920s, stocks reached their absolute low on August 24, 1921 at 63.90 on the Dow – well below their 1906 peak. But from that low, stocks rose nearly six-fold (+497%) in eight years. This will not likely happen again, since stocks were at an all-time high in February 2020, but it is reasonable to expect a return to old highs by next year and double-digit gains in quarterly GDP numbers by mid-2021.

A Song for the Times: “Ain’t We Got Fun?” (1920-21)

There are plenty of song parodies on the Internet now. I prefer the real thing. I’m a song historian and one of the big hits of 1920-21 was “Ain’t We Got Fun?” The popular lyrics that are sung today go like this:

Ev’ry morning, ev’ry evening

Ain’t we got fun?

Not much money, Oh, but honey

Ain’t we got fun?

The rent’s unpaid, dear

We haven’t a car

But anyway, dear

We’ll stay as we are

Even if we owe the Grocer,

Don’t we have fun?

Tax collector’s getting closer

Still we have fun

There’s nothin’ surer

The Rich get rich,

And the poor get poorer

In the meantime, in between time

Ain’t we got fun?

Pretty clever, but the original 1921 hit version contained some starker lines, like these:

Landlord’s mad and getting madder,

Ain’t we got fun?

Times are bad and getting badder,

Still we have fun.

There’s nothing surer,

The rich get rich and the poor get laid off

When I’m laid off, I’ll be paid off

Ain’t we got fun?

(Music by Richard Whiting, words by Raymond Egan and Gus Kahn; first performed 1920, published 1921)

All content above represents the opinion of Gary Alexander of Navellier & Associates, Inc.

Please see important disclosures below.

Also In This Issue

Global Mail by Ivan Martchev
“Computers Gone Wild”

Sector Spotlight by Jason Bodner
Is the Market Entering “Overbought” Territory Again?

View Full Archive
Read Past Issues Here

About The Author

Gary Alexander

Gary Alexander has been Senior Writer at Navellier since 2009.  He edits Navellier’s weekly Marketmail and writes a weekly Growth Mail column, in which he uses market history to support the case for growth stocks.  For the previous 20 years before joining Navellier, he was Senior Executive Editor at InvestorPlace Media (formerly Phillips Publishing), where he worked with several leading investment analysts, including Louis Navellier (since 1997), helping launch Louis Navellier’s Blue Chip Growth and Global Growth newsletters.

Prior to that, Gary edited Wealth Magazine and Gold Newsletter and wrote various investment research reports for Jefferson Financial in New Orleans in the 1980s.  He began his financial newsletter career with KCI Communications in 1980, where he served as consulting editor for Personal Finance newsletter while serving as general manager of KCI’s Alexandria House book division.  Before that, he covered the economics beat for news magazines. All content of “Growth Mail” represents the opinion of Gary Alexander

Important Disclosures:

Although information in these reports has been obtained from and is based upon sources that Navellier believes to be reliable, Navellier does not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute Navellier’s judgment as of the date the report was created and are subject to change without notice. These reports are for informational purposes only and are not a solicitation for the purchase or sale of a security. Any decision to purchase securities mentioned in these reports must take into account existing public information on such securities or any registered prospectus.To the extent permitted by law, neither Navellier & Associates, Inc., nor any of its affiliates, agents, or service providers assumes any liability or responsibility nor owes any duty of care for any consequences of any person acting or refraining to act in reliance on the information contained in this communication or for any decision based on it.

Past performance is no indication of future results. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. It should not be assumed that any securities recommendations made by Navellier. in the future will be profitable or equal the performance of securities made in this report. Dividend payments are not guaranteed. The amount of a dividend payment, if any, can vary over time and issuers may reduce dividends paid on securities in the event of a recession or adverse event affecting a specific industry or issuer.

None of the stock information, data, and company information presented herein constitutes a recommendation by Navellier or a solicitation to buy or sell any securities. Any specific securities identified and described do not represent all of the securities purchased, sold, or recommended for advisory clients. The holdings identified do not represent all of the securities purchased, sold, or recommended for advisory clients and the reader should not assume that investments in the securities identified and discussed were or will be profitable.

Information presented is general information that does not take into account your individual circumstances, financial situation, or needs, nor does it present a personalized recommendation to you. Individual stocks presented may not be suitable for every investor. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. Investment in fixed income securities has the potential for the investment return and principal value of an investment to fluctuate so that an investor’s holdings, when redeemed, may be worth less than their original cost.

One cannot invest directly in an index. Index is unmanaged and index performance does not reflect deduction of fees, expenses, or taxes. Presentation of Index data does not reflect a belief by Navellier that any stock index constitutes an investment alternative to any Navellier equity strategy or is necessarily comparable to such strategies. Among the most important differences between the Indices and Navellier strategies are that the Navellier equity strategies may (1) incur material management fees, (2) concentrate its investments in relatively few stocks, industries, or sectors, (3) have significantly greater trading activity and related costs, and (4) be significantly more or less volatile than the Indices.

ETF Risk: We may invest in exchange traded funds (“ETFs”) and some of our investment strategies are generally fully invested in ETFs. Like traditional mutual funds, ETFs charge asset-based fees, but they generally do not charge initial sales charges or redemption fees and investors typically pay only customary brokerage fees to buy and sell ETF shares. The fees and costs charged by ETFs held in client accounts will not be deducted from the compensation the client pays Navellier. ETF prices can fluctuate up or down, and a client account could lose money investing in an ETF if the prices of the securities owned by the ETF go down. ETFs are subject to additional risks:

  • ETF shares may trade above or below their net asset value;
  • An active trading market for an ETF’s shares may not develop or be maintained;
  • The value of an ETF may be more volatile than the underlying portfolio of securities the ETF is designed to track;
  • The cost of owning shares of the ETF may exceed those a client would incur by directly investing in the underlying securities; and
  • Trading of an ETF’s shares may be halted if the listing exchange’s officials deem it appropriate, the shares are delisted from the exchange, or the activation of market-wide “circuit breakers” (which are tied to large decreases in stock prices) halts stock trading generally.

Grader Disclosures: Investment in equity strategies involves substantial risk and has the potential for partial or complete loss of funds invested. The sample portfolio and any accompanying charts are for informational purposes only and are not to be construed as a solicitation to buy or sell any financial instrument and should not be relied upon as the sole factor in an investment making decision. As a matter of normal and important disclosures to you, as a potential investor, please consider the following: The performance presented is not based on any actual securities trading, portfolio, or accounts, and the reported performance of the A, B, C, D, and F portfolios (collectively the “model portfolios”) should be considered mere “paper” or pro forma performance results based on Navellier’s research.

Investors evaluating any of Navellier & Associates, Inc.’s, (or its affiliates’) Investment Products must not use any information presented here, including the performance figures of the model portfolios, in their evaluation of any Navellier Investment Products. Navellier Investment Products include the firm’s mutual funds and managed accounts. The model portfolios, charts, and other information presented do not represent actual funded trades and are not actual funded portfolios. There are material differences between Navellier Investment Products’ portfolios and the model portfolios, research, and performance figures presented here. The model portfolios and the research results (1) may contain stocks or ETFs that are illiquid and difficult to trade; (2) may contain stock or ETF holdings materially different from actual funded Navellier Investment Product portfolios; (3) include the reinvestment of all dividends and other earnings, estimated trading costs, commissions, or management fees; and, (4) may not reflect prices obtained in an actual funded Navellier Investment Product portfolio. For these and other reasons, the reported performances of model portfolios do not reflect the performance results of Navellier’s actually funded and traded Investment Products. In most cases, Navellier’s Investment Products have materially lower performance results than the performances of the model portfolios presented.

This report contains statements that are, or may be considered to be, forward-looking statements. All statements that are not historical facts, including statements about our beliefs or expectations, are “forward-looking statements” within the meaning of The U.S. Private Securities Litigation Reform Act of 1995. These statements may be identified by such forward-looking terminology as “expect,” “estimate,” “plan,” “intend,” “believe,” “anticipate,” “may,” “will,” “should,” “could,” “continue,” “project,” or similar statements or variations of such terms. Our forward-looking statements are based on a series of expectations, assumptions, and projections, are not guarantees of future results or performance, and involve substantial risks and uncertainty as described in Form ADV Part 2A of our filing with the Securities and Exchange Commission (SEC), which is available at or by requesting a copy by emailing All of our forward-looking statements are as of the date of this report only. We can give no assurance that such expectations or forward-looking statements will prove to be correct. Actual results may differ materially. You are urged to carefully consider all such factors.

FEDERAL TAX ADVICE DISCLAIMER: As required by U.S. Treasury Regulations, you are informed that, to the extent this presentation includes any federal tax advice, the presentation is not written by Navellier to be used, and cannot be used, for the purpose of avoiding federal tax penalties. Navellier does not advise on any income tax requirements or issues. Use of any information presented by Navellier is for general information only and does not represent tax advice either express or implied. You are encouraged to seek professional tax advice for income tax questions and assistance.

IMPORTANT NEWSLETTER DISCLOSURE:The hypothetical performance results for investment newsletters that are authored or edited by Louis Navellier, including Louis Navellier’s Growth Investor, Louis Navellier’s Breakthrough Stocks, Louis Navellier’s Accelerated Profits, and Louis Navellier’s Platinum Club, are not based on any actual securities trading, portfolio, or accounts, and the newsletters’ reported hypothetical performances should be considered mere “paper” or proforma hypothetical performance results and are not actual performance of real world trades.  Navellier & Associates, Inc. does not have any relation to or affiliation with the owner of these newsletters. There are material differences between Navellier Investment Products’ portfolios and the InvestorPlace Media, LLC newsletter portfolios authored by Louis Navellier. The InvestorPlace Media, LLC newsletters contain hypothetical performance that do not include transaction costs, advisory fees, or other fees a client might incur if actual investments and trades were being made by an investor. As a result, newsletter performance should not be used to evaluate Navellier Investment services which are separate and different from the newsletters. The owner of the newsletters is InvestorPlace Media, LLC and any questions concerning the newsletters, including any newsletter advertising or hypothetical Newsletter performance claims, (which are calculated solely by Investor Place Media and not Navellier) should be referred to InvestorPlace Media, LLC at (800) 718-8289.

Please note that Navellier & Associates and the Navellier Private Client Group are managed completely independent of the newsletters owned and published by InvestorPlace Media, LLC and written and edited by Louis Navellier, and investment performance of the newsletters should in no way be considered indicative of potential future investment performance for any Navellier & Associates separately managed account portfolio. Potential investors should consult with their financial advisor before investing in any Navellier Investment Product.

Navellier claims compliance with Global Investment Performance Standards (GIPS). To receive a complete list and descriptions of Navellier’s composites and/or a presentation that adheres to the GIPS standards, please contact Navellier or click here. It should not be assumed that any securities recommendations made by Navellier & Associates, Inc. in the future will be profitable or equal the performance of securities made in this report.

FactSet Disclosure: Navellier does not independently calculate the statistical information included in the attached report. The calculation and the information are provided by FactSet, a company not related to Navellier. Although information contained in the report has been obtained from FactSet and is based on sources Navellier believes to be reliable, Navellier does not guarantee its accuracy, and it may be incomplete or condensed. The report and the related FactSet sourced information are provided on an “as is” basis. The user assumes the entire risk of any use made of this information. Investors should consider the report as only a single factor in making their investment decision. The report is for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of a security. FactSet sourced information is the exclusive property of FactSet. Without prior written permission of FactSet, this information may not be reproduced, disseminated or used to create any financial products. All indices are unmanaged and performance of the indices include reinvestment of dividends and interest income, unless otherwise noted, are not illustrative of any particular investment and an investment cannot be made in any index. Past performance is no guarantee of future results.