June 4, 2020 by Dymphna

Up next: the Roaring Twenties?

Something very, very important happened between the Spanish Flu and the Roaring Twenties

Are we about to enter the next ‘roaring twenties’?

Are we going to bounce out of this like we bounced out of the Spanish Flu pandemic of 1918-19, and launch into the one of the most epic bull runs in human history?

This was a point Shane Oliver from AMP was making the other day:

Finally, a word of caution – anyone who got too negative for the long term in the last really major pandemic of 1918-19 might have missed out entirely on the “Roaring Twenties!” It’s much easier to think up negative things.

The general point he is making here is right. It is very easy to imagine horror scenarios. In fact, it’s a little bit enjoyable to imagine horror scenarios, and as humans, we often have a tendency to overestimate how bad things are going to get.

I mean, do you remember at the start of the crisis when the government’s chief medical officer was saying that the best case – the best case – scenario was that COVID would claim 50,000 lives in Australia.


Where are we at now? About 100..?

(I think we can call that a miss.)

The point is that fear is easy and fear is seductive, and if you’re not clued into that fact, then you can miss massive opportunities.

And this is why I think that when the fear cycle really takes hold – I’m still expecting it sometime around October – there’s going to be a herd-like exodus from the market, and golden opportunities are just going to be lying around on the ground.

But there’s a couple of other points to note here too.

First, between the Spanish flu and the roaring twenties there was a global recession in 1920-21.

So don’t be in too much of a hurry to buy.

They cycle needs to fall before it can rise. There’s no snap-back without a slowdown. There are no opportunities without a correction.

It’s the same story this time around. Australia looks set for a recession… at least!

The global economy is definitely set for a recession, and it’s very conceivable that we’ll find ourselves in a global depression before too long.

So we can see that we’re going to be “drawing back the bow” for the remainder of the year, perhaps all the way through 2021.

At its worst, it’s probably going to feel like the end of capitalism, if not civilisation itself.

The people who bought in too early will have given up hope, and investing in anything will seem like it makes no sense. That’s what the papers will say. That’s what everyone will tell you. That’s the advice you’ll get from your Uber driver.

“Don’t buy now. Are you crazy?!?”

And, like always, that will be the perfect time to buy.

I’m making it sound easy, but buying against the herd is incredibly hard.

You need to build confidence in your education, confidence in your strategies and confidence in your ability to read the market.

If you can do that (and that bit is not as hard as it sounds), then you’ll be able to seize the opportunity when it comes.

But now is the time to be investing in yourself and building that confidence.

Don’t be in a rush to buy in now.

But don’t leave it too late either.