Rally to continue

Markets had rallied after 1918’s Spanish Flu, and we expect same to happen again.

Spanish Flu pandemic of 1918 has been the worst pandemic in human history till now. It killed about 1.7% of world population and compared to that, Corona has killed just about 0.012% of world population. Spanish flu was 141 times more deadly!

History indicates that after the Corona pandemic is over, the stock markets may witness a big long-term rally. To understand whether that is actually possible or not

, this article will look at the past incidences of major pandemics and their impact on stock markets.

Spanish Flue was the deadliest pandemic in human history

The Spanish flu pandemic of 1918, the deadliest in history, infected an estimated 500 million people worldwide—about one-third of the planet’s population—and killed an estimated 20 million to 50 million victims. In percentage terms, it infected about 27% of the world’s population and killed about 1.7% of the world’s population. Were a similar pandemic to hit the world today, this would translate into 100 million deaths.  This made the Spanish flu one of the deadliest epidemics in history.

The 1918 flu was first observed in Europe, the United States and parts of Asia before swiftly spreading around the world.

At the time, there were no effective drugs or vaccines to treat this killer flu strain. Doctors and scientists were unsure what caused it or how to treat it. Unlike today, there were no effective vaccines or antivirals, drugs that treat the flu.

The Corona pandemic’s current global mortality rate is 0.012%, implying that Spanish flu was 141 times more fatal than Corona!

Spanish Flue had caused a correction of just 11%

 spanish flue dji

No Past Pandemic has affected the markets in long term

In fact, in almost all cases, the markets have bounced sharply after the pandemics.  

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A picture emerges that echoes Warren Buffet: short-term markets can react wildly to headlines, but long-term stocks are the place to be.

Stock Market Up by 500% in nine years after Spanish Flu & depression


Following the end of the depression, the Roaring Twenties brought a period of economic prosperity between August 1921 and August 1929

The Roaring Twenties was a decade of economic growth and widespread prosperity, driven by recovery from wartime devastation and deferred spending, a boom in construction, and the rapid growth of consumer goods such as automobiles and electricity in North America and Europe and a few other developed countries such as Australia.

Now let us look at why there was a depression after the Spanish flu, and are there any possibilities that we will also face some kind of recession?

Understanding the Depression of 1920–1921

The Depression of 1920–1921 was a sharp deflationary recession in the United States, United Kingdom and other countries, beginning 14 months after the end of World War I. It lasted from January 1920 to July 1921.

There is no formal definition of economic depression, but two informal rules are a 10% decline in GDP or a recession lasting more than three years, and the unemployment rate climbing above 10%.


Factors that economists have pointed to as potentially causing or contributing to the downturn include troops returning from the war, which created a surge in the civilian labor force and more unemployment and wage stagnation; a decline in agricultural commodity prices because of the post-war recovery of European agricultural output, which increased supply; tighter monetary policy to combat the postwar inflation of 1919; and expectations of future deflation that led to reduced investment.[2]

End of World War I

Adjusting from war time to peacetime was an enormous shock for the U.S. economy. Factories focused on wartime production had to shut down or retool their production. A short recession occurring in the United States following Armistice Day was followed by a growth spurt. The recession that occurred in 1920, however, was also affected by the adjustments following the end of the war, particularly the demobilization of soldiers. One of the biggest adjustments was the re-entry of soldiers into the civilian labor force. In 1918, the Armed Forces employed 2.9 million people. This fell to 1.5 million in 1919 and 380,000 by 1920. The effects on the labor market were most striking in 1920, when the civilian labor force increased by 1.6 million people, or 4.1%, in a single year. In the early 1920s, both prices and wages changed more quickly than today.

1918–1920 Spanish flu pandemic

The Spanish flu pandemic in the United States began in spring 1918 and returned in waves into 1920, killing about 675,000 Americans. Because a large fraction of the deaths were among working age adults, the resulting economic dislocation was especially severe.

Labor unions

During World War I, labor unions had increased their power—the government had a great need for goods and services, and with so many young men in the military, there was a tight labor market. Following the war, however, there was a period of turmoil for labor unions, as they lost their bargaining power. In 1919, 4 million workers went on strike at some point, significantly more than the 1.2 million in the preceding years. Major strikes included an iron and steel workers strike in September 1919, a bituminous coal miners strike in November 1919, and a major railroad strike in 1920. According to economist J. R. Vernon, “By the spring of 1920, with unemployment rates rising, labor ceased its aggressive stance and labor peace returned.”

Faulty Monetary policy

Milton Friedman and Anna Schwartz, in A Monetary History of the United States, consider mistakes in Federal Reserve policy as a key factor in the crisis. In response to post–World War I inflation the Federal Reserve Bank of New York began raising interest rates sharply. In December 1919 the rate was raised from 4.75% to 5%. A month later it was raised to 6%, and in June 1920 it was raised to 7% (the highest interest rates of any period except the 1970s and early 1980s).


According to a 1989 analysis by Milton Friedman and Anna Schwartz, the recession of 1920–1921 was the result of an unnecessary contractionary monetary policy by the Federal Reserve Bank. Paul Krugman agrees that high interest rates due to the Fed’s effort to fight inflation caused the problem. This did not cause a deficiency in aggregate demand but in aggregate supply. Once the Fed relaxed its monetary policy, the economy rapidly recovered.


  • After pandemics, markets have always gone up and this rally may continue.
  • Spanish Flu was 141 times more fatal than Corona, yet the stock markets continued to rise
  • After the Spanish flu and one-year recession, stock markets witnessed a 500% rally lasting nine years.
  • None of the factors that caused the one-year recession after the Spanish Flu are present today, so there may not be any serious correction. Those who wait for a serious correction may lose a very big opportunity.
  • There will be huge upheavals in sectors and investing in a wrong sector may lead to a financial catastrophe.


  • en.wikipedia.org
  • worldometers.info
  • globalfinancialdata.com

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