Overstimulated? Shares soar 75% in historic 12-month run

NEW YORK (AP) – A year ago the terrifying free fall for the stock market came to an abrupt end, ushering in one of its longest streaks.

On March 23, 2020, the S&P 500 fell 2.9%. In total, the index fell nearly 34% in about a month, wiping out three-year gains for the market.

That turned out to be the bottom line, even as the coronavirus pandemic worsened in the following months and the economy sank further into recession. Massive amounts of support for the economy from the Federal Reserve and Congress limited the stock’s slide. The market recovered all its losses in August.

Over time, the rapid development of coronavirus vaccines helped stocks soar even higher. So did the growing legions of first-time investors, who suddenly had plenty of time to enter the market using free business 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 race appears to be one of the best 365-day stages for the S&P 500, if not the best, since before WWII. Based on month-end figures, the last time the S&P 500 rose that much in a 12-month period was in 1936, according to Howard Silverblatt, a senior index analyst at S&P Dow Jones Indices.

All of the furious movement has also raised concerns that stock prices have gone too far, too fast. Here are five trends that helped shape the market over the past year:


The great Wall Street rally actually had two distinct stages. At first, Big Tech stocks and winners from the sudden stay-at-home economy pushed the market higher. Amazon benefited as people bought more online, Apple racked up 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 biggest on the market by value, so their gains helped offset weakness in other sectors as the economy continued to struggle.

However, since last fall, enthusiasm for an economic takeoff has sparked a more widespread rebound. Banks, power 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 help. Those gains are also picking up the slack in tech stocks, which have lost momentum as interest rates soar on concerns about higher inflation.


Stuck at home with little to do, people were looking for ways to use up a few dollars that might otherwise have been spent on a movie, restaurant meal, or vacations. Many flocked to the stock market via their phones, as trading apps made it easy to buy and sell stocks with just a few taps, without commissions.

Customers under 40 accounted for 35% of trades last month at Charles Schwab, nearly double the rate two years earlier. Accounts less than one year old are operating more in total at Charles Schwab than accounts that are more than 10 years old.

Many of those merchants have been using the money they received as stimulus payments from the United States government. The Robinhood trading app popular with many novice investors saw a deposit percentage increase of exactly $ 1,200 or $ 2,400 after the government sent checks for those amounts last spring, right after the stock market bottomed, for example. A new round of government payments is underway – $ 1,400 to individuals.

Social media has only amplified the trend, as traders talk on Reddit, Twitter, and elsewhere about what stocks to buy. They have been helping drive the stock market in general, but their influence is most evident in what is known as “meme stocks.” GameStop was up 1.625% in January, for example, even though the video game retailer has struggled financially. Earnings from GameStop, AMC Entertainment, and other meme stocks defied gravity and, in the opinion of nearly all professional Wall Street investors, common sense.


All the craze around stocks has raised concerns on Wall Street that prices have skyrocketed too much. Much of the criticism centers on how much faster stock prices rose than corporate earnings.

Another potential sign of too much greed and little fear: Investors are so hungry for the next big thing that they are pouring billions of dollars into investments before they even know where the money might go. These investments are called special purpose acquisition companies, although they are better known by their acronym, SPAC. Armed with cash raised from investors, SPACs look to private companies to buy so that the company can easily list its shares on an 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.


The coronavirus really knows no geographic borders. As it devastated populations and economies around the world, global financial markets suffered heavy losses.

The recovery has also been global. Shares of 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 have lagged behind, although they perform much better when viewed in dollars rather than euros. Worsening infection rates are raising concerns about a “third wave” on the continent and forcing governments to re-establish some restrictions on daily life. But the hope is that the continued launch of vaccines will return economies and trade to normal around the world.


Even with so many new investors joining the market, not everyone benefits from rising stocks. Only slightly more than half of all US households owned stocks in 2019, either from daily trading stocks or from having an S&P 500 index fund in a 401 (k) account.

Also, not all stocks have participated in the market rally in the last year. A handful of stocks within the S&P 500 are actually lower, led by Gilead Sciences, which is down 9.8%. The action skyrocketed early in the pandemic when its drug remdesivir became a treatment for COVID-19, but fell back in part due to concerns about upcoming patent expirations.

Other early stock winners from the pandemic have also waned since the market took off a year ago, including Clorox, whose sanitizing wipes became commonplace, and spam maker Hormel Foods.


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