The US economy may be on the verge of a significant boom reminiscent of the 1920s, according to UBS.
The global financial institution believes there’s a 50% chance that America could experience a new “Roaring ’20s,” characterized by robust growth, increasing prosperity, and strong economic performance.
Jason Draho, head of asset allocation for the Americas at UBS, argued that the US is already meeting several criteria for such a scenario. These include strong GDP growth, stable inflation, and favorable monetary policies.
“It’s no longer too soon nor too optimistic to suggest that the US will experience a Roaring ’20s economy. It already is by our criteria, with the relevant question being whether these conditions will continue, not whether they will materialize,” Draho sttated in a note released Monday.
The original Roaring Twenties, a century ago, saw widespread economic expansion driven by technological advancements like electricity and automobiles, as well as a post-war consumption boom. UBS now sees similar dynamics emerging, with factors like technological innovation—particularly in AI—playing a crucial role.
Despite some concerns, such as potential unemployment increases and global risks, Draho is optimistic that the balance tips toward prosperity, with recent positive trends in GDP growth and inflation. For instance, US GDP for Q2 2024 grew at an annual rate of 3%, and inflation is now in the Fed’s target range of 2-3%.
The Federal Reserve’s recent interest rate cuts and commitment to full employment further support the possibility of a continued economic boom, though challenges remain. Draho acknowledged the risks, including a looser labor market and geopolitical uncertainties, but maintained that the economic outlook is increasingly favorable for sustained growth.
UBS projects that if these trends hold, the US economy could experience a sustained period of economic expansion through the end of the decade, with growth and productivity playing central roles in the next phase of America’s economic resurgence.
With input from Fortune and Business Insider.
