Potential Resurgence of the Roaring ’20s in the US Economy: An Analysis by Ed Yardeni

Introduction

In a recent interview on Bloomberg’s “Merryn Talks Money” podcast, veteran market strategist Ed Yardeni presented a compelling argument for the possibility of the US economy reliving the vibrant era of the “roaring ’20s.” This projection is rooted in the convergence of several key factors, including loose post-pandemic monetary policy, rapid technological advancements, and historical parallels that evoke the transformative spirit of the 1920s.

Drawing Parallels to the Roaring Twenties

Yardeni draws attention to striking similarities between the current economic landscape and the circumstances that set the stage for the roaring ’20s. Just as the world emerged from the devastation of World War I and the Spanish flu pandemic, so too has the global economy weathered the challenges of the COVID-19 pandemic. Additionally, the economic downturn experienced in 1923 mirrors the recent economic disruptions caused by the pandemic.

Technological Innovation as a Driving Force

Yardeni emphasizes the pivotal role of technological innovation in driving economic growth. He points to the transformative impact of technological advancements in the early 20th century, such as the widespread adoption of plumbing and the introduction of more efficient auto-manufacturing techniques. These innovations sparked a surge in productivity, setting the stage for the economic prosperity of the roaring ’20s.

Technological Revolution in the 21st Century

Yardeni draws a parallel between the technological revolution of the 1920s and the ongoing technological revolution of the 21st century. He asserts that today, every company is either a technology company or a user of technology. This ubiquitous presence of technology, he argues, has the potential to unleash a new wave of productivity growth, mirroring the transformative effects of technological innovations in the 1920s.

Data Supporting the Productivity Growth Boom

Yardeni’s optimistic outlook is bolstered by recent economic data. The Bureau of Economic Analysis reported that the US’s Gross Domestic Product (GDP) expanded by a robust 3.3% over the final quarter of 2023, surpassing initial expectations. Additionally, the benchmark S&P 500 stock-market index is trading at record highs, further indicating the strength of the economy.

UBS’s “Roaring ’20s Outcome” Forecast

Yardeni’s projection of a potential resurgence of the roaring ’20s aligns with the assessment of the Swiss bank UBS. In November 2023, UBS predicted that the robust growth figures observed in the previous year would lay the foundation for a “new macro regime” with the potential to replicate the economic prosperity of the roaring ’20s in the US economy.

Conclusion

Ed Yardeni’s analysis presents a compelling case for the possibility of the US economy recapturing the vibrancy of the roaring ’20s. Drawing parallels to the transformative technological innovations of the early 20th century, he argues that the ongoing technological revolution has the potential to drive a new wave of productivity growth, mirroring the economic resurgence experienced during the roaring ’20s. Recent economic data, including strong GDP growth and record-high stock market performance, further bolster his optimistic outlook. Yardeni’s projection resonates with the forecast made by UBS, which predicts a “roaring ’20s outcome” for the US economy based on the robust growth figures observed in the previous year. While the future remains uncertain, Yardeni’s analysis provides a compelling narrative for the potential resurgence of economic prosperity in the United States.