U.S. economy could boom in 2021 like it did in the aftermath of World War II, says Morgan Housel

  • Morgan Housel told CNBC may be primed for a recovery in 2021 that is most akin to the post-World War II boom.
  • The former Wall Street Journal columnist emphasized that this was not his "baseline scenario" for an American economy that was severely damaged by the crisis. 
  • But, he added, "there's so much pessimism of what's going on, justified pessimism, that I think we underestimate how good 2021 could be going forward."

Behavioral finance expert Morgan Housel told CNBC on Tuesday that the U.S. economy may be primed for a coronavirus recovery in 2021 that is most akin to the post-World War II boom. 

"One thing that I think is overlooked or underappreciated today, are the odds — and this is not my baseline forecast — but the odds that 2021 could actually be one of the best years for the economy in history, which sounds ridiculous given what we are dealing with right now," Housel said on "The Exchange." 

The U.S. economy has been devastated by the -19 pandemic, with forced business closures and other restrictions meant to slow the spread of the disease causing severe damage the labor market and disrupting everyday life. The nation's unemployment rate spiked to nearly 15% in April, but has since climbed back down to 8.4% for August. 

In response to the health crisis, U.S. policymakers have unleashed a barrage of fiscal and monetary support measures to aid the struggling economy. Indeed, it is many of those factors stemming from the pandemic that lay the groundwork for what could be a major rebound in the U.S. economy next year, according to Housel, a former columnist at The Wall Street Journal who is now a partner at venture capital firm The Collaborative Fund.

"Think of the amount of pent-up demand of people who are just so eager to get out of their homes and go on vacation, go back to a restaurant, combined with the incredible amount of government stimulus from both the Federal Reserve and from Congress," Housel said. 

"You put those two things together, and if we were to get a vaccine in the coming weeks, the coming months, going into early 2021, put all those factors together and what 2021 could look like is something most analogous to the end of World War II," he said. 

In the mid-1940s, Housel said there was a built-upappetite to spend after the U.S. economy had shifted its focus to the war effort, with what then-President Franklin D. Roosevelt dubbed "the arsenal of democracy." 

"You had an incredible amount of pent-up demand for consumer goods because everything was shut down during the war, combined with a lot of government stimulus from the GI Bill, which set the stage of the economic boom of the '50s and '60s," Housel said. 

Housel — whose latest book, "The Psychology of Money," was released Tuesday —emphasized that an economic boom at that level next year was "not my baseline scenario." But, he added, "there's so much pessimism of what's going on, justified pessimism, that I think we underestimate how good 2021 could be going forward."

As the stock market experiences a couple days of declines, particularly in high-flying tech stocks that led the rally from coronavirus-lows in March, Housel again pointed to the past in offering guidance to investors. 

"The most important thing any investor can do, amateur or professional fund manager, is just understand the long history of market volatility and realize that when something like this happens, like what we're dealing with today or on , how normal that is over time," he said. 

"The stock market, on average, over the last 100 years declines at least 10% at least once a year, 20% at least every two or three years," he added. "So when you deal with something like that, it doesn't feel like it's necessarily broken or something is wrong with the economy, but that this is the cost of admissions that we have to pay in order to achieve long-term returns." 

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