By taking a stroll down memory lane and examining the history of the twentieth century we gain valuable perspective on how today’s lingering economic malaise and turbulent geopolitical situation is most likely to resolve. It is well known that history repeats, though not exactly. The state of affairs resembles different aspects of the three previous busts as well as some brand-new wrinkles.
The next boom phase will contain characteristics of earlier expansions and bull markets as well as some events we can’t imagine. As we examine the past you may feel some déjà vu. This should provide some solace for the future as you realize stocks will rise to new lofty levels in the next decade. Once the hangover from the 2007 to 2009 financial crisis subsides, governments will begin to function effectively again, facilitating growth and innovation.
Financial markets began the twentieth century on a wild ride. Global volatility would moderate considerably during this century as the international playing field leveled off. But the early years were trying. A bear market from April 1899 to September 1900 that shaved 31.5 percent off the Dow heralded in the new century as immigrants fleeing oppression and turmoil in Europe flooded the United States at the rate of 100 per hour in 1900.
A brief nine-month bull market that lifted the Dow 48 percent ended in the ...