Jeff Hirsch on Why Big Federal Spending Plus Inflation = “Superbooms”
Feb 19, 2025
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Jeff Hirsch, Editor of the Stock Trader’s Almanac and author of 'Super Boom,' delves into the intriguing concept of 'superbooms' driven by federal spending and inflation. He highlights historical examples where wars and government expenditures sparked economic surges. Hirsch discusses how recent fiscal measures post-COVID, like the CARES Act, can mirror past superbooms, suggesting a similar bullish market trend today. He provides insights into long-term investment strategies that capitalize on this unique economic environment shaped by technological innovation and governmental policies.
Government spending during crises, like wars or pandemics, historically drives market booms through increased cash flow into the economy.
The rise of AI and technology presents significant investment opportunities, comparable to the early internet era, prompting long-term growth in various sectors.
Deep dives
AI's Impact on Business Productivity
Artificial intelligence (AI) is revolutionizing how businesses operate by enhancing productivity and accelerating decision-making across various industries. Companies that fail to adopt AI risk falling behind competitors who embrace these technological advancements. The integration of AI requires substantial computational power, which can lead to high costs when utilizing standard cloud platforms. However, Oracle Cloud Infrastructure (OCI) offers a cost-effective solution, providing up to 50% savings on compute, 70% on storage, and 80% on networking compared to other major providers.
The Connection Between Federal Spending and Market Trends
Government spending has a significant influence on market trends, particularly regarding periods of war and inflation. Historical patterns reveal that high federal spending, such as during the COVID-19 pandemic or previous conflicts, tends to correlate with market booms due to the influx of cash distributed into the economy. The conversation highlighted how similar dynamics were observed during past wars, where excessive government expenditure created bullish conditions in the stock market. As new policies and spending initiatives emerge, there is potential for sustained economic growth and investment opportunities in sectors like technology and defense.
Future Projections for Technology and Investment
The evolution of technology, especially AI, is anticipated to create new investment opportunities reminiscent of the early internet era. Analysts suggest that long-term investors should focus on sectors such as defense, energy, and emerging technologies due to their expected growth trajectories. The current economic climate is predicted to mirror previous booming markets propelled by transformative technologies. By recognizing these trends and historical parallels, investors might expect continued market expansion into the next decade.
Wars, national defense spending, technology innovations – historically, these have had big impacts on the economy. The result: A spike in inflation and a huge surge in market prices. How can you take advantage of these Superbooms?
Jeffrey Hirsch is editor of the Stock Trader’s Almanac & Almanac Investor Newsletter. He wrote the 2011 book, “Super Boom: Why the Dow Jones Will Hit 38,820 and How You Can Profit From It.” He sees a similar sort of cycle today.
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