Happy New Year!
Time to press Ctrl-Alt-Delete on the decade and reboot the 20’s.
We’re looking to the future with plenty of positivity with our planning around our ‘Scenario A’. We hope the enthusiasm isn’t the tail end of the Christmas sugar-rush overindulgence, actually by now we’re normally feeling lower from the cold turkey combined effect of a dry (drier) January and um, well, literally too much cold turkey.
As you will all have seen many many times before, past performance is no guide to the future. Our regulator is very keen that we include that everywhere, every time we put anything down in writing to you. Notwithstanding this, we are basing our Scenario A on events from the past - not the behaviour of the markets, but the behaviour of the people. Before we start though, it would be a massive insult to all of those who lived or died in it to compare what we are going through now to the events of the second half of the nineteen-teens; World War 1 was a brutal conflict that we must never understate in any comparisons and the Spanish Flu that swiftly followed it affected one-third of the world’s population in a time where there was no NHS, no vaccine and no antibiotics to fight off secondary complications. People were much poorer too, with the State pension only a decade old and paying out the equivalent in today’s terms of just £26 per week and means-tested - only paying out to those who earned under £2200 per annum (again, in today’s terms). Things were of course much tougher, but then they were tougher before the war too.
None of that last paragraph resonated particularly with our promise of positivity ahead however it is what happened next that we are focusing on. The Roaring Twenties (cue cheesy 20’s references from this point). Here in the UK, in lots of Europe and across the pond in the US, the pent up (fun) energy and increased income for the ‘average’ person exploded into a decade of dancing, fun, drinking and ‘All That Jazz’ 😉- see. The Années Folles (Fr: crazy years) saw a boom in spending at the newly seen chain stores, cinemas, dance halls and on the first proper production cars. Rising real wages, mostly as a result of a sharing of profits/wealth more fairly than previously (although there was still a large have/have to not divide), led to a spending boom on the high street and also to millions of new investors into the stock markets. As we have said before, the stock markets are mostly a simple combination of supply and demand, so more demand will put upward pressure on prices. $100 invested in November 1920 in the S&P500 soared to nearly $730 (including dividends) by August 1929 during all the debauchery and fun but was nearly back to square one early by 1932. We can’t believe anything like those numbers will ever be seen again and what is even more surprising as it was a decade of deflation. Combine that increased demand today with the basically zero return on cash and that is why we feel more people will be herded into the door labeled ‘your capital is at risk’, it’s about time and exactly the right thing, for others it could be a problem after all ‘Some Like it Hot’ whereas others can’t handle the heat.
For the scumbag scammers though it’s another opportunity for a feeding frenzy on those not getting quality advice, for you ‘Thoroughly Modern Millie’s’ with an adviser already in place, that’s not a problem, just run any stuff by us.
So, we see this decade will be seeing us all dancing like Josephine Baker, holidaying like Noel Coward’s ‘Mad Dogs and Englishmen’ and indulging in the luxury, glamour, exuberance of a new wave of Art Deco, stemming from our increased faith in social and technological progress. The social progress from the 1920s being that finally afforded to women with voting rights and the technology via radio, in the 2020’s that hopefully looks more like racial and disability equality and the new technology is the video conferencing that will enable more working from home and migration away from the cities.
The 1920s did come to an abrupt halt halfway through though here in the UK (US later), the reintroduction of the Gold Standard and increasing interest rates meant the UK became uncompetitive in the global markets and lost control of its ability to be energy self-sufficient and paid a heavy price, the rest of the world soon followed and the Great (?) Depression. This is a stark reminder of how politicians and policymakers can ruin all our fun, so let’s make hay while the sun shines ‘Gatsby-style’, but also make sure we put away a few quid somewhere sensible for that rainy day.
If you or any friends or family want to chat about any of this, send us an email at email@example.com.