Coronavirus pandemic fails to conquer market
S&P 500 wraps up one of its best 365-day runs dating back to before WWII
NEW YORK — It was one year ago that the terrifying free-fall for the stock market suddenly ended, ushering in one of its greatest runs.
On March 23, 2020, the S&P 500 fell 2.9%. In all, the index dropped nearly 34% in about a month, wiping out three years’ worth of gains for the market.
That turned out to be the bottom, even though the coronavirus pandemic worsened in the ensuing months and the economy sank deeper into recession.
As time passed, the quick development of coronavirus vaccines helped stocks shoot even higher. So did growing legions of firsttime investors, who suddenly had plenty of time to get into the market using free trading apps on their phones.
As time passed, a variety of factors combined to create a 76.1% surge for the S&P 500 and a shocking return to record heights. This run looks to be one of the, if not the, best 365-day stretches for the S&P 500 since before World War II. Based on month-end figures, the last time the S&P 500 rose this much in a 12-month stretch was in 1936, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.
Wall Street’s latest big rally actually has had two distinct stages. Early on, Big Tech stocks and winners of the suddenly stay-athome economy pulled the market higher. Amazon benefited as people shopped more online, Apple hoovered up sales as more people worked from home and Zoom Video Communications surged as students and adults started meeting online. Tech stocks as a group are the market’s biggest by value, so their gains helped make up for weakness across other sectors as the economy continued to struggle.
Since last autumn, though, excitement for an economic liftoff has caused a more widespread upturn. Banks, energy producers and smaller companies whose profits would be the biggest beneficiaries of a stronger economy have led the way, as coronavirus vaccines roll out and Washington delivers even more financial aid.
Meanwhile, people stuck at home with little to do looked for ways to use some dollars that might have otherwise been spent on a movie, restaurant meal or vacation. Many turned to the stock market via their phones, as commission-free trading apps made it easy to buy and sell shares with a few taps.
Clients under the age of 40 accounted for 35% of trading last month at Charles Schwab, nearly double the rate of two years earlier. Accounts less than a year old are doing more trading in total at Charles Schwab than accounts that have been around more than 10 years.
Nevertheless, the frenzy around stocks has raised worries along Wall Street that prices may have shot too high, with criticism focused on how much faster stock prices climbed than corporate profits.
But even with so many first-time investors, only a little more than half of all U.S. households owned stocks in 2019, whether by day-trading stocks or holding an S&P 500 index fund in a 401(k) account.