Stocks were mixed on Thursday, the last trading day of the year. The Dow (INDU) was flat this morning, after reaching a record high on Wednesday, while the wider S&P 500 (SPX) increased by 0.1%. The Nasdaq Compound (COMP) 0.1% slipped.
“2020 ends,” wrote Paul Hickey, co-founder of Bespoke Investment Group, in a note to clients. “Unfortunately, 2021 is going to look a lot like 2020, but hopefully by the end of the year it looks more like something better.”
While the economy is nowhere near its strength before pandemic, equities are in a record high. The S&P and Nasdaq reached their latest highs on Monday. All three indices are at the end of the year with gains. For the Nasdaq, it is becoming the best year since 2009.
At the beginning of 2020, investors were worried that the market might have less wind, as the Fed stopped lowering interest rates and boosting the economy. Trump’s tax cuts have run out. On top of that, the US-China trade agreement still hung in the balance. But little did they know they were about to fall off a cliff.
After reaching record highs at the beginning of the year, the market began to shake in February for fear of the coronavirus pandemic, deepening sales in March as lock-in measures increased across the United States. The Dow regularly set new records for its biggest one-day point declines in history, and the New York Stock Exchange had to suspend trading in the S&P 500 several times because the index fell too fast.
But in the ensuing months, as the economic pain of the pandemic continued, the stock market recovered faster than many expected.
“It’s been a year with a lot of memories for investors: number one, do not overreact,” Leo Grohowski, chief investment officer of BNY Wealth Management, told CNN Business.
As the market screamed back from the strong losses in March, investors who panicked and withdrew their money lost out on the rally.
The duration and strength of the stock market was one of the most surprising parts of the year for investors. People will look back on this year and wonder how such market records could be achieved against the backdrop of unprecedented economic problems, said JJ Kinahan, chief strategist at TD Ameritrade.
The lesson: “Wall Street just does not reflect Main Street,” Kinahan said. “But the other part of this is that there is also no stock market in the main street.”
Indeed, companies that eventually gained market share during the pandemic, such as Amazon (AMZN) and Walmart (WMT), was already a huge undertaking for Covid-19. Meanwhile, smaller businesses and mom-and-pop stores were, and still are, in a very different situation.