Within just five weeks last year, the longest bull market on record erased three years worth of stock gains, crashing more than 30% from an all-time high in February to a pandemic low on March 23, the day Federal Reserve Chair Jerome Powell pledged to use the central banks full range of tools to support the U.S. economy in this challenging time. Exactly one year and trillions of dollars in government spending later, stocks have staged a historic rally, taking investors on a wild ride.
Some highlights: Electric carmaker Tesla is now one of the most valuable companies in the world, the cryptocurrency market has swelled to more than $1 trillion and so-called meme stocks dominate Wall Street commentary with volatile swings that force exchanges to halt trading. Its still unclear how long the new bull market can last, but one year after one of the worst stock market crashes in history, here's a look at its monumental recovery.
The S&P 500 has skyrocketed over the past year, hitting its latest high on Wednesday and marking what LPL Financial Chief Market Strategist Ryan Detrick calls the best start to a bull market ever. It took just five months for the index to recover its steep Covid-induced losses, the fastest recovery ever for a correction of more than 30%. To compare, it took the S&P a staggering 20 months to recover after the index crashed by 34% in 1987. High-flying technology stocks like Amazon, Zoom and Tesla led the market to new highs last year, but this year, energy stocks have been heading up the indexs resurgence. The S&P 500 Energy Index is still about 10% off its prepandemic levels, but its surged 103% over the past year. Materials and financials arent far behind, climbing 92% and 90%, respectively.
The Dow, which counts 30 market leaders in its ranks, has also soared 76% over the past year, though its pandemic low was on March 16, one week before the S&P's trough. A testament to the economys impending recovery, cyclical stockswhich tend to outperform during periods of growth but fall hard during recessionshave driven the index's gains. Top performer Boeing tanked more than 70% in the pandemics early days, but its rocketed 165% over the past year. Meanwhile, storied investment bank Goldman Sachs nabs the Dows second-biggest gain, surging 145% as analysts look toward financials to lead the market this year. Equipment maker Caterpillar, commodities giant Dow Inc. and Walt Disney round out the top five Dow stocks over the past yearall surging at least 125%.
A new stay-at-home normal that catapulted stocks like Peloton, Zoom and Slack helped the tech-heavy Nasdaq climb to meteoric highs during the pandemic, but techs dominance has been threatened in recent weeks. The index is down about 5% from a high on February 12, as rising Treasury yields fuel concerns that investors may sell off high-priced tech stocks in favor of the risk-free asset class. But experts arent too worried yet. Its a buckle-your-seatbelt moment for tech stocks, but we believe this selloff has created a golden opportunity for investors to own secular tech winners for the next three to five years, says Wedbush analyst Dan Ives.
Massive fiscal stimulus spending, including nearly $720 billion in forgivable loans doled out to small businesses, has been a boon to the Russell 2000, a basket of small-cap stocks with market values that are typically less than $1 billion. The index has outperformed the broader market and posted its best quarter ever during the pandemic. With President Joe Bidens lofty $1.9 trillion stimulus plan shoring up fresh funding for the economic recoveryand an even bigger $3 trillion infrastructure plan in the works, Bank of America analysts say they think small caps will continue to outperform larger companies this year.
Perhaps most emblematic of the markets bullish mania are the staggering gains in the meme stocks popularized by an army of Reddit traders in late January. Heading up gains is GameStop, the past years best-performing stock in the Russell 2000. The Grapevine, Texas-based video game retailer reached a meteoric high on January 27, as retail traders coordinated an effort to buy up Wall Streets most heavily shorted companies, stirring a panic among hedge funds that exited their positions with steep losses. Short interest has plummeted since, and the rallys taken a breather, but two months into the frenzy, GameStops still sporting eye-popping gains that have landed prices at more than ten times analysts average one-year price expectations. Meanwhile, meme stocks AMC Entertainment and BlackBerry are also holding up, climbing 300% and 200%, respectively, over the past year.
ViacomCBS, the S&Ps best-performing stock over the past year (save for a couple new additions on MondayPenn National Gaming and Caesars Entertainment), is another testament to the recent retail trading frenzy. The company, founded in 2019 by the merger between CBS and Viacom, has long garnered bearish calls from analysts, but with short interest thats roughly five times greater than the S&Ps average, shares have skyrocketed in the months since Reddit traders started plowing into heavily shorted stocks. Though its Paramount+ streaming service has helped improve its outlook, one analyst last week said the stock has run too far and climbed too high.
The past years raging bull market is not without its losses. The S&Ps worst-performing stock over the period belongs to California-based Gilead Sciences, which surged alongside other biotech companies in January 2020 as the pandemic took hold, but has floundered ever since. The companys Covid-19 treatment, remdesivir, pulled roughly $3 billion in sales last year, and it was even hailed as a miracle treatment by former President Donald Trump, but like with other biotechs last year, investors lost interest. Only four S&P stocks have fallen over the past year, and three of them, including Biogen and Viatris, are biotechs.
Shares of electric carmaker Teslalast years best-performing S&P 500 stockare down for the year and have plunged nearly 25% from a late-January highyet another sign the recently booming market for tech stocks could be over once post-pandemic spending drives growth into other industries. Tesla made its S&P debut in December and now carries about 1.5% of the indexs weight, but some experts are worried the stocks increased volatility could spell trouble for the index-tracking funds that represent trillions in market value.
The price of the worlds largest cryptocurrency has skyrocketed over the past year amid booming institutional adoption and heightened inflationary concerns fueled by massive government spending to combat the pandemic. Just this month, Morgan Stanley became the first big bank to offer up bitcoin exposure to wealthy clients (though its limiting the funds to investors with an aggressive risk tolerance), and Goldman Sachs is also dabbling in the space with a cryptocurrency trading desk that opened up this month.
At $61.55, the price of a barrel of U.S. oil benchmark West Texas Intermediate stands at nearly three times the price of $23.36 one year ago, but the oil markets volatile ride has been anything but a straight shot up. Prices seeped into negative territory for the first time in history last April, when pandemic lockdowns led to a glut in supply that became too expensive to maintain. Now, experts are bullish that prices can continue to bounce back as the world reopens. Were going to need more supply as demand comes roaring back, and add to that all the stimulus thats been pumped out by governments, the massive growth in money supply and I think were headed toward a global synchronized economic recovery thats going to be pretty strong, NOV Inc. Chairman and CEO Clay C. Williams said in an earnings call last month of energys impending boom.
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