Echoes of the Roaring ’20s: Prosperity, Debt, and the Fragility Beneath
Invested In Us | Issue 4
A century ago, the Roaring 1920s delivered markets awash in optimism, rapid innovation, and seemingly limitless growth. But just a decade later, the world faced depression and global conflict. Today, the echoes are hard to ignore.
Markets Are Rallying, Earnings Beat Lowered Expectations
As of August 15, the S&P 500 is up 10.6% year-to-date, with telecom and information technology leading performance, while healthcare remains the weakest sector [1]. Since April 8, the index has gained nearly 30%, a rally powered more by optimism around deregulation and tax cuts than fear of tariffs [1].
Earnings season has been stronger than anticipated, but context matters. During April’s volatility, many companies lowered or even withdrew forward guidance [1]. By resetting the bar lower, management teams may now be reaping the benefits of optics — “beating” numbers that were already reduced.
AI Spending, Slowing Jobs, and the Fed’s September Dilemma
Several companies have announced multi-billion-dollar investments in artificial intelligence, betting that these technologies will unlock productivity gains and long-term job creation [1]. In the near term, however, job growth has slowed, which is why investors are increasingly pricing in the likelihood of a Federal Reserve rate cut in September [1]. While markets are convinced of easing, the economic data has not yet confirmed a sharp slowdown. Any move would likely be an alignment cut — bringing policy rates closer to inflation, now running below 3% against a 2% target [1]. The risk: a cut that stimulates activity could also reignite inflationary pressures.
Debt and Deficits: A Sobering Backdrop
The U.S. national debt has surpassed $37 trillion [2]. In July alone, the federal deficit reached $291 billion, nearly 20% higher than the same month last year [3]. Through the first ten months of fiscal 2025, the deficit totals $1.6 trillion, about $109 billion wider than the same period in 2024 [4]. Debt now exceeds 100% of GDP — a level last seen during World War II [5]. Interest payments alone consume nearly $880 billion annually, more than the government spends on Medicare or defense [6].
Parallels to the 1920s — and Lessons for Today
The 1920s and 2020s share striking similarities: surging markets, technological breakthroughs, favorable tax and policy shifts, and a political environment tilting toward more centralized authority. A century ago, those conditions fueled a boom that ended abruptly with a depression and then war. Today, rising debt burdens, deficits, and geopolitical tensions suggest the same structural fragility beneath today’s prosperity.
Investor Perspective
The lessons of history are clear. Extended booms built on leverage and policy stimulus can leave economies exposed to sudden shocks. Just as in the 1920s, prosperity and fragility coexist. For investors, the most effective defense is diversification and a focus on high-quality assets that can endure volatility.
This Week’s Takeaway
Periods of euphoria rarely end smoothly. Discipline and preparation matter most when history begins to rhyme.
Community Spotlight
At NJK, we believe community is the foundation of growth. This week, we’re highlighting Eric Kleinstein, Founder of The BORK Club (Business Owners Raising Kids) — a platform created to support, connect, and celebrate entrepreneurs who are building both businesses and families.
Through conversations, resources, and a growing community, The BORK Club is redefining what it means to balance entrepreneurship and parenthood.
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