7 Easy Things Learned from The Roaring Twenties 2.0

All the way back in January 2020 we wrote about The Roaring Twenties 2.0. What have been the biggest changes since then?

The Pandemic

No question. It would be easier to describe what the Pandemic has not changed rather than what it has changed. The answer is…not much. You name it, and the Pandemic has changed it. Business…Work-From-Home (WFH) model. Education…I do not even know where to start with this one. What about consumer spending patterns? Home Depot (HD) and Lowes (LOW), although their stock price certainly did not increase the most, were squarely in the winner’s circle. Travel was out. Takeout was in.


Where are we now? We went from Covid-19 to the Delta Variant to the Omicron Variant and now the XBB. 1.5 Variant. Who knows what’s next? We do know, or at least are led to believe, we will be dealing with some sort of variant going forward for some extended period. Even Average Joe’s, whether times are good, or not, know They Don’t have to Wait Until Thanksgiving to be Grateful.


Back in the original post, we said, “Why will we have the Roaring Twenties 2.0? Technology, interest rates and the employment outlook are three strong reasons to say yes.” Let’s revisit and update:

1) Technology

Back then we said, “Technology will only accelerate in the future. The valuations will ebb and flow, which means prices go up and down. However, the disruption of industries will continue, even in some spaces where it should not.”


Technology rode the wave. After a setback in late 2022, wow, the worm has turned again.


Has it ever!


Rising interest rates had altered the investment landscape particularly in the Technology Sector.
The so-called Magnificent Seven have been, well, Magnificent. These are:


• Alphabet (GOOGL)
• Amazon (AMZN)
• Apple (AAPL)
• Meta Platforms (META)
• Microsoft (MSFT)
• NVIDIA (NVDA)
• Tesla (TSLA)


The rally has been so strong that the Technology Sector of the Standard and Poor’s 500 Index represented 30% of the Index on November 30, 2024. 1)


The latest, (I didn’t say greatest) development is Artificial Intelligence (AI). This has captured the hearts, minds, and budgets of folks in this space big time.

2) Interest Rates


Ah, yes, interest rates. As we said back then, “During the Great Recession of 2007-2009 (which was very poorly labeled) the government cut interest rates to almost zero. Then they artificially manufactured a way to keep them there for almost a decade.”

The Fed’s primary response had been to raise interest rates. In December 2022, they raised the target federal funds rate range to 4.25%-4.50%. The most recent 50 basis is the seventh consecutive increase in interest rates and the highest since December 2007. 2) This was, of course, the month and year when the Great Recession of 2007-2009 kicked off. You know what happened then.

Well, here we are now in early 2025 and interest rates were cut in late 2024. The Federal Reserve Board (The Fed) had been on a mission to fight inflation. Inflation peaked at 9.1% during the Pandemic. Over time, the Fed has been successful to bring Inflation down to 2.6% currently.

Many folks in their 20’s and even early 30’s had NEVER experienced Inflation. Ouch!

The Feds target for the inflation rate is about 2%. Keep in mind, with inflation currently running at over 2.6%:


The ‘last mile’ can be the most difficult one.

3) Employment


Back then we said, “If you want a job, there is one available for you. OK, it might not be at the pay scale or the hours you want, and the commute might be a bit much. And, yes, the boss might be a jerk. Sorry about all of that. But if you want to work, there is job out there for you.”

What a ride. Tons of folks were laid off at the beginning of the pandemic. In April 2020, the unemployment rate reached 14.8%, the highest rate observed since data collection began in 1948. 2) The unemployment rate in November 2024 was 4.2%. 3) While the Fed does not give a specific number it is looking for in unemployment, it appears to be comfortable with a number around 4%.

Now, you guessed it, many employers can’t find anyone to work. This is even way after the Federally enhanced unemployment benefits have long expired. A lot of folks packed it in during the Pandemic. This was called The Great Resignation. It’s not clear to me how they have continued to pay their bills going forward. It would appear to me that this should be called The Great Sabbatical. I’m guessing that those bills have probably been piling up. It might be time for many of these folks to get back to work.


The Federal minimum wage is $7.25 an hour, which, if you can believe it, has not changed since 2009. In Connecticut the minimum wage will increase to $16.35 an hour on January 1, 2025. Hat’s off to Connecticut for increasing the wages while the federal government continued to sleep. Locally though, you must wonder, does it matter? In September 2024 Amazon announced it will increase average base hourly pay to $22 an hour for new hires in their fulfillment centers.


As one astute observer said, working there is anything BUT fulfilling.


Therein lays the rub. Many of these positions are entry level.


We also mentioned what could potentially go wrong. The big three we mentioned were Trade, a Recession and Confidence.


4)Trade


Back then we said, “As Bob Dylan sang, ‘The times they are a-Changin.’ Amen. Rising tariffs, intellectual property theft and counterfeiting top the list of global trade issues. Negotiations with China over trade have been going slowly.”

Now we are having even more fun with trade. Now everyone knows what a supply chain is. Excuse me; everyone now knows what a supply chain ISSUE is. Indeed. The bottlenecks in the supply chain have slowly worked themselves out. Companies won’t necessarily bring all of the work back to the U.S. They will however figure out ways to get their supply chains shorter and get their products closer to their customers.

President Elect Trump has discussed applying Tariffs, well, almost everywhere. We’ll just have to wait and see where this goes along with his other proposed policies.


5)Recession


Back then we said, “There will be a recession. There always is. Plan accordingly. There were a ton of lessons learned from the The Great Recession of 2007-2009. Perhaps the most important lesson is that the sequence of returns really matters.”

Well, we did get a recession. According to the National Bureau of Economic Research the recession ended in April of 2020 after a mere two months. No surprise, this was the shortest recession in U.S. History. It was only one third as long as the 6-month recession in 1980 and one fourth as long as the recession following the dot.com bubble in 2001. (3)


At the risk of repeating myself, yes, we will have another recession.


When will this be?


Who knows!


Always be on the lookout for the 6 Black Swans Easy to See.


6)Confidence


Back then we said, “Confidence is a tricky one. When folks are working and getting their paycheck direct deposited, life is good. Sing along.”

Looking at the massive decline in unemployment mentioned above, many folks that want to are back to work. This is a very good thing. Rising interest rates hit the bond market and the stock market. After the Fed started cutting interest rates again, both have subsequently rebounded. It has also hit the real estate market. Hard. With elevated prices, higher interest rates and a severe lack of inventory, that rebound is not forecasted to be soon.

What didn’t we mention back then?


7)Inflation


Wow has this quickly reared its ugly head. Jerome Powell, Chair of the Federal Reserve, was saying that inflation was “transitory” (or temporary). He has since backed off on this commentary. Which means, um, err, ah, well get used to it. Exhibit A for inflation is going into the grocery store or when you pull in to buy gas. Of course, these are not included in the inflation numbers as they are too volatile. Right. Does everyone in the U.S. eat and do a lot of people drive?

Keep in mind, interest rates and inflation don’t necessarily move in lockstep. As Mark Twain said, “History doesn’t repeat itself, but it does rhyme.”


Conclusion

Back in 2020 we said, “The Roaring Twenties 1.0 (the 1920’s version) did not end well. The Wall Street Stock Market Crash of 1929 is considered the worst in U.S. history. The Dow lost 90% from its high in September 1929 to its low in July 1932. (5) This brought on the Great Depression, which regrettably was appropriately labeled.”


As Yogi Berra said, “It’s tough to make predictions, especially about the future.”


Continue to stay strapped in and enjoy the ride!

  1. Yahoo. Finance.com
  2. b2ls.gov
  3. msn.com
  4. Wall Street Journal December 12, 2021
  5. Thebalance.com

This article is original content written by Manchester, CT Financial Advisor Thomas Scanlon, CFP® ,CPA