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The History of Economic Prosperity in the United States

The United States has a very long history of economic prosperity and it seems like most of those strong times occur right after a very scary market downturn like the tech bubble, the housing market bubble and potentially the coronavirus!  But to be quite honest, talking about how great America is really makes me really freaking proud to be an American! 

I can’t say that I am recommending that you watch, ‘Team America – World Police’ but if you have seen this movie, then chances are you are singing the exact phrase that I sing all day on the Fourth of July, and really just anytime that I’m feeling a little bit patriotic!

But before I go off the rails too far, I’m going to keep us on track because not only do I think economic prosperity is important for all of us to understand as investors, but I think it’s important for us to understand as Americans as well, and if you live in another country then you can easily use the links that I am going to reference to learn more about your country, too!

So first off, what even is economic prosperity? I think that WDM describes it best when they say:

“Economic prosperity is the key element to quality of life and is also necessary for the nation to be competitive in the world economy. As local economies move from production-based to ones based on creativity and innovation, they must grow in ways that strengthen industries, create good jobs and encourage economic investment. To increase wealth and living standards, the economy must promote and sustain diversity, innovation, competition and entrepreneurship.”

What does that really mean?  In essence, it’s really meant to be an all-encompassing facet to judge the long-term viability of the economy.

So, what were some of the most prosperous times throughout history for the economy of the US?  I’m not going to go into all of them, but CNN Business wrote a really good article highlighting some of the most prosperous times in the US and I just want to hit on some of the highlights!

1961 – 1969

A lot of money was brought into the economy for various reasons, primarily being the Vietnam war.  This growth lasted nearly 9 years until a recession occurred at the end of this time period.

One thing that I have learned from investing is that when a war or national tragedy happens, a lot of times there is a lot of spending in the economy that can almost in a sort give the economy a jolt and get things moving again.  Of course, as a long-term investor, you should never bank on something like this happens because it largely means something bad has happened to the country as a whole, but make sure you’re staying even minded as an investor throughout all time periods!

1991 – 2001

Many of you will be familiar with this time period as one of the great tech booms in the US.  This was the same timeframe that the internet was really beginning to take off. 

Of course, this massive growth led to a massive bubble and then things popped in 2001 as we saw a pretty major recession occur, which is why we always emphasize investing for the long-term!

2009 – 2019

Coming out of the housing market crash in 2008/2009, the economy rebounded impressive back to a record level for the S&P 500 hitting more than twice as high as the pre-market crash value.  A lot of this growth was fed by stimulus packages to help boost the economy to get things moving again, but that is one of the very important roles that the Fed must play.

As I was doing some research on the most prosperous times in the US, a very common theme occurred to me – essentially, these times butted right up on an awful time period such as a recession or a depression, or whatever you would call this time with the coronavirus? I guess that we could call it a recession and a new bull market since I’m pretty sure that it has qualified as both…

One thing that I came across that I thought was really cool is that starting in 2007, Legatum starting ranking countries based off of many different pieces of criteria, on an annual basis.  Below is the snapshot from 2017 where the US was ranked in a tie for first!

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When I saw this, I really did get a sense of overwhelming pride as I mentioned earlier!  It feels pretty good to know that we’re part of such a prosperous country.  So, how have things trended since 2007 then?

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As you can see per this chart above, the US was ranked 17th in 2009 and then not much has changed in the next decade, being 18th in 2018 and 18th in 2019.  Overall, the US has a dark green in all categories except ‘Safety and Security’ and ‘Health’ and to be honest, there goes some of my strong sense of pride! 

Of course, I am still beyond ecstatic being an American, but barely ranking in the top 60 (wow!) is not something that I am proud of by any means.

In the summary that Legatum provided, you can pretty easily see that the Economic Prosperity for the US is at an all-time high:

And while I personally HATE graphs that have zero sort of perspective in terms of values or anything like that and just show the sizes of two flag poles, I do think that this graph shows how things have trended and that the US is truly at an all-time high!

If you’re like me and you want more information, you can check out the full report here, but buyer beware, it is 122 pages…

Seeing it was 122 pages made me immediately flip to the executive summary, where they did have the chart below which I found extremely beneficial:

In summary, the US has had some really strong periods of economic growth and economic prosperity.  We’re currently in the middle of a pretty severe market downturn, and likely going to be a HUGE impact to the economic stability in the US, so are we poised for a very prosperous time in the coming years after the coronavirus?