It took 16 years for stock market to recover losses after 1929 but it recovered in less than 6 months in 2020.

It took 16 years for stock market to recover losses after 1929 but it recovered in less than 6 months in 2020. Is this chart an example of survivor bias i.e. focus only on success whilst excluding failure.

During the aftermath of great depression, President Roosevelt increased government spending - construction of large scale public works such as dams, bridges, schools and subsidized federal lending to rail road and industries. The administration established FDIC, SEC, social security, minimum wage and many more to counter great depression.

Although it took 16 years for stock market to recover, the unprecedented government spending on infrastructure, Industrial and military translated into prosperity that lifted millions into middle class. United states firmly established itself world power and USD became global reserve currency.

US government has used monetary policy to combat every recession since 1929. Unlike the recovery after great depression, millions of Americans have been left behind resulting in huge wealth gap between rich and poor.

why?

Monetary policy has flooded the market with free money (0% interest rate) for credit worthy.

Free money being invested in equity market not spent on infrastructure, industrial or military projects.

Lot of free money chasing few investments has led to inflated asset price and dramatic time reduction in market recovery.

If you do not own real estate or equities, you are certainly left behind. Less than 50% of US household own equities.

What next? The party will continue until

1. US global status declines resulting in higher borrowing cost. We have witnessed Spanish, Dutch and British decline in modern times.

2. Democracy - Unlike capitalism, every vote has equal weight - majority of Americans vote for wealth redistribution.

3. Democracy 2.0 - Trade voting rights for monetary benefits. It is already in practice in equity market (Dual class stocks) - investors forfeit voting rights but own tech stocks for financial gains.


Predictions are hard but entertainment is guaranteed. We all have front row seat, just fasten your seat belt, sit back and just watch.

Views are personal and certainly not an investment advice

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