NEW YORK (AP) – It had been a year since the terrifying free fall for the stock market ended suddenly and ushered in one of its biggest runs.
On March 23, 2020, the S&P 500 fell 2.9%. Overall, the index fell nearly 34% in about a month, wiping out three years of gains for the market.
That turned out to be the bottom, even as the coronavirus pandemic worsened in the months that followed and the economy plunged deeper into recession. Tremendous amounts of support for the economy from the Federal Reserve and Congress limited the extent to which stocks would fall. The market made up for all its losses in August.
Over time, the rapid development of coronavirus vaccines helped the stocks shoot even higher. So did the growing legions of new investors, who suddenly had enough time to hit the market with free trading apps on their phones.
It all led to a 76.1% rise for the S&P 500 and a shocking return to record highs. This run appears to be one of, if not the, best 365-day rides for the S&P 500 since pre-WWII. According to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, the last time the S&P 500 rose that much in a 12-month period in a 12-month period.
All the furious moves have also raised concerns that stock prices may have gone too far, too fast. Here are five trends that have helped shape the market in the past year:
– TWO BULL MARKETS IN ONE
The great Wall Street rally actually had two distinct phases. Early on, Big Tech stocks and sudden home economy winners pulled the market up. Amazon benefited as people shopped more online, Apple increased sales as more people worked from home, and Zoom Video Communications increased as students and adults began meeting online. Tech stocks as a group are the largest in the market by value, so their gains helped offset weakness in other sectors as the economy continued to struggle.
However, since last fall, the excitement over an economic launch has sparked a more widespread resurgence. Banks, energy producers and smaller companies whose profits would be the biggest beneficiaries of a stronger economy have led the way as coronavirus vaccines are rolled out and Washington provides even more financial aid. Those gains are also pulling back the slack for technology stocks, which have lost momentum as interest rates rise amid concerns about higher inflation.
– FIRST INVESTORS JOIN, AND THE GAME WILL NOT END
People were left at home with little to do and were looking for ways to use some dollars that might otherwise have been spent on a movie, a meal at a restaurant, or a vacation. Many took to the stock market on their phones, as trading apps made it easy to buy and sell stocks with a few taps and no commission.
Customers under the age of 40 accounted for 35% of last month’s trade at Charles Schwab, nearly double from two years earlier. Accounts less than a year old in total trade more with Charles Schwab than accounts that have been around for more than 10 years.
Many of those merchants use money they have received as stimulus payments from the US government. The Robinhood trading app popular with many beginner investors saw the percentage of deposits increase by exactly $ 1,200 or $ 2,400 after the government sent checks for those amounts last spring, just after the stock market hit bottom, for example. Another round of government payments – $ 1,400 to individuals – is underway.
Social media has only amplified the trend as traders on Reddit, Twitter and elsewhere talk about which stocks to buy. They have helped push the stock market broadly up, but their influence is most evident in what has come to be known as ‘meme stocks’. GameStop, for example, is up 1,625% in January, even though the video game store is struggling financially. Profits for GameStop, AMC Entertainment and other meme stocks defied gravity – and, in the opinion of almost every professional investor on Wall Street, common sense.
– A SPACE TACULAR BOOM RAISES CONCERNS
All the stock mania has raised concerns on Wall Street that prices may have skyrocketed. Much of the criticism has focused on stock prices rising much faster than corporate earnings.
Another potential sign of too much greed and not enough fear: Investors are so hungry for the next big thing that they are putting billions of dollars into investment before they even know where the money can go. These investments are referred to as special-purpose acquisition companies, although they are better known by their acronym, SPACs. Armed with money raised from investors, SPACs look for private companies to buy, so the company can easily list its shares on a stock exchange.
Last year, SPACs raised $ 83.4 billion, more than six times the year before. They have already surpassed that level in less than three months this year.
– A GLOBAL RECOVERY
The coronavirus really has no geographic boundaries. While it devastated populations and economies around the world, global financial markets suffered sharp losses.
The recovery has also taken place worldwide. Shares from China, South Korea and other emerging markets as a group have risen almost exactly the same percentage as the S&P 500 since March 23, 2020. Japan’s Nikkei 225 index has also risen a similar amount.
European markets lagged, although their performance is much better in dollars instead of euros. Worsening infection rates are heightening concerns about a “third wave” on the continent and forcing governments to bring back some restrictions on everyday life. But the hope is that the continued rollout of vaccines will return economies and trade around the world to normal.
– WHO IS GOING BEHIND?
Even with so many new investors entering the market, not everyone is benefiting from rising stocks. Only slightly more than half of all U.S. households owned stocks in 2019, either through day trading stocks or by holding an S&P 500 index fund in a 401 (k) account.
Likewise, not every stock has participated in the market’s rise in the past year. A handful of stocks within the S&P 500 are even lower, headed by Gilead Sciences, which is down 9.8%. The stock rose early in the pandemic when the remdesivir drug became a treatment for COVID-19, but fell back in part on concerns about patent expiration.
Other early stock winners from the pandemic have also rallied since the market took off a year ago, including Clorox, whose disinfectant wipes became currency, and spam maker Hormel Foods.