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For Main Street and much of the country, 2020 cannot end soon enough. But for Wall Street, the year ended on a much happier note, as investors set record highs while betting government controls and vaccinations will aid economic recovery in 2021.
The outlook for the silver liners market to come 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 fell a third from Jan. 19 to March 23,” Silverblatt noted of the S&P 500’s free fall, the fastest to date.
But that was then. Investors in the S&P 500 stock index are making a total return of almost 18% for the year, and a majority of that gain comes from a mere trio of tech giants – Apple, Amazon and Microsoft. “Fifty-eight percent comes from these three companies, and the top 24 wins,” Silverblatt said Wednesday.
The technology-laden Nasdaq composite climbed 43.6% in 2020; the S&P 500 ended the year with a record closing, up 16.3%; and the blue-chip industry index Dow Jones rose 7.2%, or 2,068 points, to end the year at 30,606.
“We’re in a better place to come out of the year than in September because the rally is wider,” said Art Hogan, chief market strategist at National Securities, of a recent move in stocks from home work with economically sensitive actions. “There is pent-up demand for things we haven’t been able to do.”
Biggest winners: Etsy and Tesla
Those work-from-home stocks include Etsy, up about 330% year-to-date, a gain that only exceeded electric carmaker Tesla’s S&P 500, up just over 730%, according to Silverblatt calculations. Tesla shares benefited again in December when the popular automaker joined the 500-stock index that largely serves as a benchmark for the US stock market.
Worst performers include Carnival and Norwegian Cruise Line, both down nearly 60% for the year, reflecting a cruise and travel industry hammered by the coronavirus.
Nine months after the start of the pandemic, employers reduction work as coronavirus infections continue to spread, keeping many people at home and prompting state and local governments to reimpose social distancing restrictions on businesses.
“Half of the people who lost their jobs in the recession are still out of work, so the market expects economic activity to pick up again next year,” Hogan said, hoping for respite from the economic fallout from COVID-19 in the labor market. . For example, weekly jobless claims averaged 1.45 million in 2020 compared to around 220,000 in 2019.
Silverblatt agrees investors are banking on relief from a new round of government stimulus checks as well as COVID-19 vaccinations, but wonders if they are getting ahead of themselves, in terms of how quickly a return to normal could occur. As he puts it: “This market is crazy; there’s a lot of optimism in there.”
He cites a tendency for individual investors as opposed to professional fund managers to enter the market from November. “People want to join, we’re building to make the second half great.” But if the rebound does not materialize as expected, Silverblatt expects a time to factor in equities in the coming quarters.
According to Peter Boockvar, chief investment officer at Bleakley Advisory Group, the easiest part of 2021 is forecasting the direction of economic growth and earnings, the hardest part is predicting what the right price / earnings ratio will be for companies. actions. A price-to-earnings ratio, or P / E ratio, is used to determine whether a company’s stock price is high or low relative to that company’s earnings growth. “Should he [the stock price] be 22 times [earnings]? 18 times? 15 times? 25 times? “, Asked Boockvar.” There is a wide dispersion in the possible outcomes of the S&P 500 based on this. ”
Global equity markets closed the year near record highs and the dollar held at a two-year low.
Dizzy dollar
The weakness in the greenback has kind of passed under the radar along with everything else, but I think it has the potential to become more relevant in 2021 as this is the initial locus that reflects the market’s reflections on debt and the ever-growing US deficits ”. Boockvar wrote in a year-end customer note. “Another notable weakness would then have implications for inflation and long-term interest rates.”
Interest rates are expected to rise as the economy rebounds further with a vaccine.
Commodity stocks – particularly oil, gas, agriculture, and copper – continue to be favored by Boockvar, who also likes “precious metals, bank stocks, value stocks than technology and Amazon. have not killed, some travel and leisure names, emerging Asian equities. markets, as well as the UK and Turkey. “
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