And why not ! Why, after these long months of hardship, confinements, reconfigurations, saturation of almost all hospital intensive care units in the world, to name a few and the worst, wouldn’t we relive the 21st century version equivalent of “Roaring twenties” 100 years ago in the United States?
At the end of the First World War – and incidentally of another pandemic, that of the Spanish flu -, humanity lived a beautiful period of economic and stock market euphoria. Soaring stock markets, surge in production, rise of the automobile, household appliances and advertising, better distribution of work, all with the simultaneous advent of radio and cinema, initially silent then speaking: it was a prosperous moment, admittedly little covered in school books, but who can swear that history will not repeat itself?
American economists have in any case drawn the parallel and do not exclude a bis repetita. In all transparency, I too am quite seduced by this scenario and without going so far as to talk about the alignment of the planets, I find that there are still good reasons to believe in it.
Between 1919 and the crash of 1929, the financial markets were ultra-bullish, with a fivefold increase in global market capitalization. Okay, we are (still) far from it, but they are currently in a good dynamic, beyond one or the other phase of consolidation all that is more logical. Between the ultra-accommodating monetary policies of the central banks, which are working hard to avoid a new financial crisis and abounding the equity markets with liquidity, the extremely expansionary budgetary policies now deployed around the world to revive the economy and real interest rates at zero, it must be recognized that many key elements are in place for the equity markets to continue to advance.
Otherwise, nearly $ 450 billion landed in equity funds in the space of five months, a gigantic windfall, and at least twice a week I receive phone calls from managerial friends who ask me if I don’t have an idea of investing in the world of small and midcaps, my favorite field. The appetite and the will are there, which is an extremely good sign!
Now, to have a decade of the Roaring Twenties, we absolutely need a boom in consumption, a boom that remains possible knowing that French households have saved more than € 250 billion since the start of the health crisis and that’globally, available savings now reach 18% of GDP, double the figure for 2019. What will happen to this money? Households will want to keep precautionary savings, but I find it hard to believe that all those savings will purr in the bank and believe in some kind of catch-up effect. The case of Fnac Darty, which reported extremely solid annual accounts despite the harshness of the context (Editor’s note: in detail, turnover increased by 0.6%, with a jump of 55% in online sales which I think is very revealing), shows in any case that there is a real will of our fellow citizens to spend. However, it is true, everything here is a matter of psychology.
Rising markets, good momentum in consumption… There remains a third element, linked to technical progress. Because po we can dream of the roaring twenties, we need a boom in jobs and productivity. At first glance, this development is not really obvious given the rise of the “Gig economy” (see elsewhere), which results in a multiplication of low-paid, low-skilled and therefore low-productivity jobs.
At the dawn of a new industrial revolution?
However, a recent study by the research firm McKinsey caught my attention. I read it and, to put it simply, the guiding principle is that digitalization and business automation will spark a new golden age for the global economy, following what had happened during the post-war boom, another blessed time.
With the spectacular surge in teleworking, undoubtedly a major trend in the coming years, companies should accelerate their transformation and develop on the web. Tstill, according to this study, three quarters of companies prevent an increase in their technological investments over the next five years, which seems plausible given the influx of requests reported by IT companies in their publications.
Besides that of home office, the booms of 5G, IoT (Internet of Things) and cybersecurity show that a new paradigm is emerging in our economies. Of course, for everything to work, we must also invest in training so that no one is left out of the way… An economy cannot indeed be built with only a part of society that is doing well!
It is imperative that productivity increases for this decade that started so badly to be in fine a decade of roaring years … while wishing that History does not stutter completely.
Remember the crisis of 1929 and the advent, from the beginning of the 1930s, helped by the economic slump, of regimes of sinister memory.
We are not there yet, but must be vigilant. Protect against excess, learn the right lessons from the crisis we are experiencing – it is not over – to come out on top, stronger and grow. Humanity has already done it.
She can do it again.
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