Summer of ’69
7 Sep, 2020 |
READ TIME 4 mins
Jesse Imer
Fixed Income Investment Strategist

Today, I want to talk about the Autumn of ’68 in the USA.  While not as catchy as Bryan Adam’s “Summer of  ’69”, the US Autumn of 1968 was quite a notable period, but for all the wrong reasons.

Calendar year 2020 has some striking similarities to 1968, a year often considered one of the most troubled in USA’s history.

Five direct comparisons

  1968 2020
Pandemic Highly contagious virus – “H3N2” or Hong Kong Flu – triggers a pandemic which sweeps the globe. Infection causes upper respiratory illness, with highest mortality in those aged 65 and above. Pandemic kills millions, including 100k Americans. Highly contagious virus – “COVID-19” or coronavirus – triggers a pandemic which sweeps the globe. Infection causes upper respiratory illness, with highest mortality in those aged 65 and above. Pandemic kills 1 million (so far) including 185k Americans (so far).
US civil unrest US protests in response to racial injustice become a regular feature of the US news. Peaceful protests spur sympathetic protests from like-minded citizens around the world. US protests morph into riots, looting and property destruction. US protests in response to racial injustice become a regular feature of the US news. Peaceful protests spur sympathetic protests from like-minded citizens around the world. US protests morph into riots, looting and property destruction.
Activism US athletes raise gloved fists during the national anthem to protest violence towards and poverty among African Americans. The next day the IOC strips their medals and sends them home. In time, what was then seen as an ungrateful affront to America became a stand for equality. US athletes kneel during the national anthem to protect violence towards and systemic racism against African Americans. The sports leagues support them because of recent actions by Colin Kaepernick in 2016 paving the way for this form of activism.
US elections Tense elections as the Republican nominee campaigns on a platform of Law and Order. Tense elections as the Republican nominee campaigns on a platform of Law and Order.
Stock market Stocks rally to all-time highs despite enormous social strain. Stocks rally to all-time highs despite enormous social strain.
Monetary system Beginning of pressures on the monetary system that eventually led to a break of the gold standard and a 25% price decline of the US dollar (USD). Beginning of pressures on the monetary system, with questions being asked regarding USD remaining the world reserve currency. USD down 5.7% YTD.

Differences

While there are similarities between 1968 and 2020, there are many differences to note as well.

In 1968, there were many events affecting the USA landscape that are not present today. Events such as the Vietnam War, military draft, and the assassination of Robert Kennedy and Martin Luther King Jr. These have no direct analogue to 2020.

Stock market returns

Richard Nixon (Republican) winning the November 1968 election was the peak in the US stock market for about 4 years.

Source: Bloomberg

Nixon was re-elected, beating George McGovern 520-17 in the November 1972 election. He then resigned in August 1974 under the Watergate scandal.

Meanwhile, the global monetary system had rebooted under the USD devaluation and the change from a gold standard to a fiat money regime, that allowed for much larger fiscal deficits and higher USD debt levels than previously allowed.

The next 10-year period from 1968 was a lengthy time of stagnation for stock prices and economic “stagflation” (where inflation is higher despite higher unemployment).

A buy-and-hold investor who had bought into the US stock market in 1968 saw high amounts of volatility in their investment portfolios and only saw a capital gain after the 1972 peak in late 1979.

I note this was also a period of history where everyone knew to make money you needed to “trade” stocks. You did not make money in buy and hold strategies; you needed to be “active” and not “passive”.

Source: Bloomberg

Year 1968 was destabilising and the start of a tumultuous period.

This is not a prophecy of mine that 2021-2030 will be just as tumultuous, but I do find the analogues interesting.

How far we have come, but not so far…

To finish off the analysis of the periodic differences, I do not think this article would be complete without some other notable events.

  • Arthur Ashe became the first African American to win the US Open, incredible given the racial tensions of the time
  • After 267 years, Yale University decided to accept female undergraduates
  • OJ Simpson won the Heisman Trophy
  • Douglas Engelbart showed off the world’s first computer mouse and word processor
  • The Soviet Union invaded Czechoslovakia
  • Apollo 8 became the first manned spacecraft to orbit the Moon and then return safely
  • Segregationist George Wallace won 46 seats in the US election
  • The US Supreme Court rules 7-1 that burning a Vietnam War draft (conscription) card is NOT an act of free speech protected under the First Amendment

How times have changed, but maybe not so much.

Have a good day.

The views expressed in this article are the views of the stated author as at the date published and are subject to change based on markets and other conditions. Past performance is not a reliable indicator of future performance. Mason Stevens is only providing general advice in providing this information. You should consider this information, along with all your other investments and strategies when assessing the appropriateness of the information to your individual circumstances. Mason Stevens and its associates and their respective directors and other staff each declare that they may hold interests in securities and/or earn fees or other benefits from transactions arising as a result of information contained in this article.

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