For Main Street and much of the country, 2020 may not end soon enough. But for Wall Street, the year ends in a much happier way, as investors reach a record high, betting that the government’s controls and vaccinations will promote an economic recovery in 2021.
The market’s view of the silver lining ahead follows a year that includes both a bull market and a bear market. “We’ve had a lot of movement here and the economy has been disrupted very quickly,” Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, told CBS MoneyWatch.
“We have a third case from January 19 to March 23,” Silverblatt remarked about the S&P 500 pandemic-inspired release, the fastest yet.
But that was then. Investors in the S&P 500 stock index returned nearly 18% of total returns for the year, with the majority of profits coming from just a trio of technology giants – Apple, Amazon and Microsoft. “Fifty-eight percent come from the three companies, and the top 24 take it away,” Silverblatt said Wednesday.
The technology-laden Nasdaq lineup rose 43.6% in 2020; the S&P 500 ended the year with a record 16.3%; and the Dow Jones index of blue chips rose 7.2%, or 2,068 points, to end the year at 30,606.
“We are in a better place to end the year than in September because the rally is wider,” said Art Hogan, chief market strategist at National Securities, about a recent shift from work from home to economically sensitive stocks. “There’s a pent-up demand for things we haven’t been able to do yet.”
Biggest winners: Etsy and Tesla
The work from home includes Etsy, which has risen about 330% annually so far, according to Silverblatt’s calculation, only a profit generated by the S&P 500 by the electric car manufacturer Tesla. Tesla shares further benefited in December when the valued car company joined the 500-share index, which is widely used as the benchmark for the US stock market.
The worst performers include Carnival and Norwegian Cruise Line, both of which fell by almost 60% for the year.
Nine months after the pandemic began, employers are still delete work As coronavirus infections continue to spread, many people stay at home and state and local governments are asked to reintroduce societal distances from businesses.
“Half of the people who lost their jobs in the downturn are still unemployed, and the market predicts an increase in economic activity next year,” Hogan said, hoping for a break from the economic downturn in COVID. 19 in the labor market. . Weekly claims for unemployment benefits, for example, averaged 1.45 million in 2020 compared to about 220,000 in 2019.
Silverblatt agrees that investors are benefiting from a new round of government stimulus controls as well as COVID-19 vaccinations, but wonders if they are advancing themselves in terms of how quickly a return to normal can occur. As he puts it: “The market is nut; there is a lot of optimism in it.”
He cites a trend of individual investors as opposed to professional money managers entering the market from November. “People want to buy, we’re building for the second half to be great.” But should the rebound not materialize as expected, Silverblatt foresees a time of settlement of shares in the coming quarters.
According to Peter Boockvar, chief investment officer of Bleakley Advisory Group, the easy part of 2021 predicts the direction of economic growth and earnings, and the difficult part predicts what the right price-to-earnings ratio for equities will be. A price / earnings ratio, or P / E ratio, is used to determine whether the share price of a business is high or low relative to the earnings of the business. “Must it [the stock price] Be 22 times [earnings]? 18 times? 15 times? 25 times? “Boockvar asked.” There is a wide spread in possible S&P 500 outcomes, depending on it. ”
Global stock markets closed the year near record highs and the dollar held at two-year lows.
Dollar-doze
The weakness of the greenback has’ sort of gone under the radar with everything going on, but I think it could become more relevant in 2021, because it’s the first place that reflects the market’s thoughts on the ever-increasing U.S. debt and deficits, ‘Boockvar wrote in a note at the end of the year. “Further weakness of knowledge will then have consequences for inflation and long-term interest rates.”
Interest rates are expected to move higher as the economy bounces further with a vaccine.
Operating stocks – specifically oil, gas, agriculture and copper – continue to benefit from Boockvar, which also holds precious metals, bank stocks, value stocks that have not killed technology and Amazon, some travel and leisure names, emerging Asian stock markets, and the United Kingdom and Turkey. “