In 1950, the United States was on the cusp of a boom that would produce the largest middle class in history. It was also the beginning of a surge in the U.S. economy that would make it one of the richest countries ever. Today, China is on the verge of something similar.

1950
LloydTheVoid / Pixabay

Imagine you could travel back in time to America in 1950 and invest US$1,000 in the S&P 500 Index. By 2007, before the global financial crisis, that US$1,000 would have been worth over US$86,000 – and that’s not including reinvested dividends.

Investing in the U.S. stock market in 1950 was a once-a-century opportunity. The U.S. was just beginning a post-war consumer boom. The Baby Boomer generation was just getting started – and this turned into a demographic trend that shaped the U.S. economy for the rest of the 20th century.

This was when the concept of the “American Dream” took shape – the idea that every family could own a house with a white picket fence, at least one car in the garage, a fridge, stove, TV and an annual vacation with the kids.

What put the U.S. over the top

The U.S. was already an industrial and economic power in 1950. But then the government started encouraging Americans to start spending more “for the good of America.” That’s when the U.S. economy went to the next level and became a global behemoth – and its stock market followed.

The U.S. government wanted to engineer domestic consumption – that is, get people to spend more money buying things. In 1954, President Eisenhower reduced personal taxes to help households “increase purchasing power.” Also, during his presidency, from 1953-1961, personal incomes in the U.S. increased 45 percent.

This extra income meant Americans had more money to spend on appliances, fancy clothes, entertainment and other non-essentials. Spend they did… and they still haven’t stopped.

This post-war boom led to the creation of the largest middle class the world had even seen. But the U.S. middle class is no longer the largest in the world. That title now goes to China.

How China is like post-war U.S.

Like the U.S. in 1950, China is already an industrial and economic power. It has been the world’s manufacturing centre for over a decade. And China is home to the world’s second-largest economy.

It also has the world’s largest middle class. It’s expected to be over half a billion people by 2020. This booming middle class is also earning more money and has more disposable income – just like the Baby Boom generation that started taking shape in mid-20th century America.

And the Chinese government, like the U.S. government in the 1950s, is encouraging Chinese consumers to buy more stuff for the good of China’s economy. So, even though China’s economic growth has been miraculous for the past 20 years, it isn’t over yet.

As global investment firm Goldman Sachs recently said about China’s economic growth, “What the world has seen so far is only a preview of the opportunities to come.”

What could happen to China’s economy

To give you an idea of the “opportunities to come,” look at the chart below. The black line shows GDP per capita in the United States from 1960 to 2015, when America was the engine for the global economy. Notice the incredible growth the U.S. economy enjoyed during that time.

The red line represents China’s GDP per capita from 2000 to 2015. Notice how closely it tracks America’s historical growth.

China_GDP

As you can see, China’s GDP per capita is about where the U.S. was in 1976. But, U.S. GDP per capita growth took off from there. Now, 40 years later, U.S. GDP per capita is over US$55,000. But China’s is only about US$8,000.

If China follows a similar pattern to the U.S., its economy still has a lot of growth ahead of it. Of course, it won’t happen in a straight line and there will be some dramatic ups and downs. But it does give you an idea of what could happen.

The development of the “American Dream” created one of the richest countries the world has ever seen. China is heading in the same direction.

So there’s no need to build a time machine to go back and invest in the U.S. market in 1950. You can do something similar right now in China – and profit from the emerging “Chinese Dream.” Go here to find out more about how to invest in this once-in-a-lifetime opportunity.