Library of Congress

By William R . Gruver

Economist John Kenneth Galbraith famously said of those attempting to predict future stock market performance , “ There are two kinds of forecasters : those who don ’ t know , and those who don ’ t know they don ’ t know .” He also quipped that the only function of economic forecasting was to make astrology look respectable .

“ Idea for Economy Number ” cartoon , originally published in Life magazine , 1925 .

His point is well made — it is impossible to know with certainty what tomorrow holds . There are simply too many variables in today ’ s complex markets , each changing at a breakneck speed . To best prepare for the future , ironically , investors might be better served to look to the past for trends that might impart some wisdom .

In that spirit , one can ’ t help but compare Covid-era America with the events of 100 years ago . In 1918 , the United States was battling a pandemic , the Spanish Flu , which killed more people worldwide in 15 months than the bubonic plague had in a century . Communities from coast to coast faced the aftermath of acute economic and racial unrest . In 1920 , Warren G .

Harding was elected President on a campaign promise of a “ return to normalcy .” The names have changed , but the story sounds eerily familiar .

Given the parallels , it is reasonable to wonder — are we entering a bull market similar to the 1920s when stock prices more than doubled ? And , if so , are we in a financial bubble ¹ headed for another 1929 stock market crash ?

Financial bubbles are not always bad things . In fact , bubbles can be great for investors who can exit before market prices reach unsustainable levels . Leaving a roaring bull market , however , is harder than it sounds . It is contrary to human nature , akin to leaving a party at its peak .

10 FINANCIAL HISTORY | Fall 2021 | www . MoAF . org