We are truly living in interesting times.
The last time the world suffered from a major pandemic was between 1918 and 1919 when the Spanish Flu spread around the globe. The CDC reports that approximately one-third of the world’s population at that time was infected with the virus, and about 50 million people died.
At the same time, World War I was nearing an end. Both of these historic events had a massive impact on global economies. Shuttered businesses and a limited labor force—due to folks fighting overseas in the war and quarantine efforts to limit the spread of the Spanish Flu—ravaged economic activity.
The good news, though, was that end of World War I and the eradication of the Spanish Flu led to a decade of incredible prosperity in the U.S.—known today as The Roaring 20s.
Fast forward 100 years… while we aren’t coming out of another World War, countries around the world are fighting the COVID-19 pandemic and economies are reeling. Thankfully, several vaccines have been approved and are being distributed as we speak. Businesses and schools are reopening their doors. And economic activity is restarting, but not yet booming.
Could We Be On The Verge Of Our Own “Roaring 20s” Situation?
Wall Street is certainly acting like we are, with the stock market whizzing to new all-time highs in February.
Consider this: Since the March 23, 2020 low, the S&P 500 has soared 74%. Even more impressive is the more than 131% surge in the small-cap Russell 2000 index since the March lows. The “melt up” in small-cap stocks has been nothing short of phenomenal, with the Russell 2000 posting a 31% gain in the fourth quarter alone.
Not even the second impeachment trial of President Trump, the riots on Capitol Hill or a slew of weak economic data could stamp out the fire under small-cap stocks recently. The Russell 2000 has rallied about 16% year-to-date, versus the slight 4% gain for the S&P 500. Actually, all of the major indices breached new all-time highs in the first week of 2021 and are currently sitting at or near these highs now—though volatility picked up in late February.
With political unrest coupled with negative economic data and the ongoing COVID-19 pandemic, one would think that the stock and bond markets would be worried. But Wall Street isn’t showing any major signs of concern at this time. However…