T. Rowe Price

Chapter TenPOSTWAR ERA, 1945–1950

On April 30, 1945, Hitler fatally shot himself in the head with his Walther pistol in his bunker beneath the streets of Berlin. Soon thereafter the Germans surrendered and the war in Europe was over. On May 8, President Truman and the Allies declared V‐E Day (Victory in Europe). The first atomic bomb was dropped on Hiroshima on August 6 and the second on Nagasaki on August 9, the same day the Russians invaded Manchuria. Japanese Emperor Hirohito took over control of the country from the military and announced Japan's surrender by radio on August 14, to “save mankind.” The following day, V‐J Day, Truman addressed the nation about the Allied victory, and the official surrender was signed on September 2.

Mr. Price had drafted an investment bulletin to clients prior to these major events and then attached an addendum outlining their possible impact. He began this attachment with his usual understatement by noting, “Important events have taken place since the last bulletin on February 1945.”

From an investment perspective, this quick end to the war would both reduce the U.S. gross domestic product (GDP) as production tapered off for war materials, and create economic dislocation as factories switched from war to peace production. This could cause a business slump when the war was finally over. During the war, the government controlled the economy, distorting prices with controls, allocations, and taxes. During peacetime, the consumer once more would ...