Covid-19 Didn't Cause the Market Panic - Here's Why

This brings us to one final thing, just in case you think we can’t end up from here with a massive boom in the second half of the cycle. That’s 2021 to 2026. After this current viral interruption. Here’s some past history that will help you see just how possible – indeed likely – this is. Let’s go back 100 years. November 1919 saw the official marking of the end of the First World War. It also brought the peak of markets for that decade.

This took place amidst a flu pandemic that affected 500 million people and killed between 40 to 70 million. Much more than 3% of those infected. This subsequently came to be known as the Spanish flu.

It was termed ‘Spanish’ flu because Spain, having remained neutral during the war, was the only country honestly reporting its effects. Here’s what the website ‘vaccinestoday.eu’ had to say about it.

“There was nothing particular ‘Spanish’ about the flu: it didn't begin in Spain and, while the country was badly affected, it wasn’t hit any harder than others. (The first wave spread in US military camps in 1917.) However, Spain remained neutral during the conflict and its papers freely reported the outbreak. Media in France, the United Kingdom, Germany, the United States and elsewhere played down the impact on their own country in a bid to keep up morale. 

Newspapers were either directly controlled by national governments or keen to self-censor in the interest of patriotism at a time of war. They all happily reported on events in Spain – leading many to incorrectly presume that the Iberian Peninsula was the epicentre. In summer of 1918, the virus spread among military units who lived in cramped quarters. And, as the war ended, surviving solders returned home – bringing influenza with them. 

After four gruelling years of conflict, the immediate post-war period was a time for celebration. Public gatherings presented an ideal opportunity for infectious diseases to find new victims. This most likely prolonged the second wave of the outbreak. A third wave in the early spring of 1919 took war-weary populations by surprise, claiming millions more lives. Just as with seasonal influenza, the worst hit populations were the very old and the very young.”

1921 – note the year – saw a marked economic downturn. That was both in stock markets and commodity prices. James Grant, of Grant’s Interest-Rate Observer fame called 1921 a depression. He also labeled it ‘America's last governmentally untreated’ downturn. Government behaviour – their efforts to prevent markets tanking - is now making the booms ever bigger. So the busts will have to get bigger.