Stocks soar 75% in historic 12-month run

NEW YORK (AP) — It was one year ago that the terrifying free fall for the stock market suddenly ended.

On March 23, 2020, the S&P 500 fell 2.9 percent. In all, the index dropped nearly 34 percent 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. Massive amounts of support for the economy from the Federal Reserve and Congress limited how far stocks would fall. The market recovered all its losses by August.

As time passed, the quick development of coronavirus vaccines helped stocks shoot even higher. So did growing legions of first-time investors, who suddenly had plenty of time to get into the market using free trading apps.

It all led to a 76.1 percent surge for the S&P 500 and a shocking return to record heights. This run looks to be one of, if not the, best 365-day stretches for the S&P 500 since before World War II.

Here’s a look at trends that helped shape the market:

■ Two bull markets in one: Wall Street’s big rally actually 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 in other sectors.

Since last autumn, though, excitement for an economic liftoff has caused a more widespread upturn.

■ First-time investors: Stuck at home with little to do, people 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 trading apps made it easy to buy and sell shares with a few taps, commission free.

Clients under the age of 40 accounted for 35 percent of trading last month at Charles Schwab, nearly double the rate of two years earlier.

Many of those traders have been using money they got as stimulus payments from the U.S. government. The Robinhood trading app saw an increase in the percentage of deposits of exactly $1,200 or $2,400 after the government sent out checks for those amounts last spring.

Social media has only amplified the trend, as traders talk on Reddit, Twitter and elsewhere about what stocks to buy. Their influence is most evident in what have come to be known as ìmeme stocks. GameStop surged 1,625 percent in January, for example, even though the video game retailer has struggled financially. The gains defied gravity — and, in the opinion of nearly every professional investor on Wall Street, common sense.

■ SPAC, the next frontier: All the mania around stocks has raised worries that prices may have shot too high. Much of the criticism is focused on how much faster stock prices climbed than corporate profits.

Another potential signal of too much greed and not enough fear: Investors are so hungry for the next big thing that they’re pouring billions of dollars into investments, before they even know what the money could go toward. These investments are called specialpurpose acquisition companies. SPACs look for privately held companies to buy so that the company can easily list its stock on an exchange.

Last year, SPACs raised $83.4 billion, more than six times the prior year.

■ A global recovery: The coronavirus really knows no geographic boundaries. As it devastated populations and economies around the world, global financial markets sustained sharp losses.

The recovery has also been worldwide. Stocks from China, South Korea and other emerging markets as a group are up almost the exact same percentage as the S&P 500 since March 23, 2020. Japan’s Nikkei 225 index is also up a similar amount.

■ Who’s left behind? Only a little more than half of all U.S. households owned stocks in 2019, whether by day-trading or holding an S&P 500 index fund in a 401(k) account.

Likewise, not every stock has participated in the market’s run higher over the last year. Other early stock winners of the pandemic have also tailed off since the market took off a year ago, including Clorox, whose disinfecting wipes became like currency, and Spammaker Hormel Foods.