NATIONAL NEWS

Overstimulated? Stocks Soar 75% In Historic 12-Month Run

Mar 22, 2021, 1:57 PM
FILE (Photo by Michael M. Santiago/Getty Images)...
FILE (Photo by Michael M. Santiago/Getty Images)
(Photo by Michael M. Santiago/Getty Images)

NEW YORK (AP) — It was one year ago that the terrifying free fall for the stock market suddenly ended, ushering in one of its greatest runs.

On March 23, 2020, the S&P 500 fell 2.9%. In all, the index dropped nearly 34% in about a month, wiping out three years’ worth of gains for the market.

That turned out to be the bottom, even though the coronavirus pandemic worsened in the ensuing months and the economy sank deeper into recession. Massive amounts of support for the economy from the Federal Reserve and Congress limited how far stocks would fall. The market recovered all its losses by August.

As time passed, the quick development of coronavirus vaccines helped stocks shoot even higher. So did growing legions of first-time investors, who suddenly had plenty of time to get into the market using free trading apps on their phones.

It all led to a roughly 75% surge for the S&P 500 over the last 12 months and a shocking return to record heights. This run looks to be one of, if not the, best 365-day stretches for the S&P 500 since before World War II. Based on month-end figures, the last time the S&P 500 rose this much in a 12-month stretch was in 1936, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.

All the furious movement has also raised worries that stock prices may have gone too far, too fast. Here’s a look at five trends that helped shape the market over the last year:

Two Bull Markets In One

Wall Street’s big rally actually had two distinct stages. Early on, Big Tech stocks and winners of the suddenly stay-at-home economy pulled the market higher. Amazon benefited as people shopped more online, Apple hoovered up sales as more people worked from home and Zoom Video Communications surged as students and adults started meeting online. Tech stocks as a group are the market’s biggest by value, so their gains helped make up for weakness across other sectors as the economy continued to struggle.

Since last autumn, though, excitement for an economic liftoff has caused a more widespread upturn. Banks, energy producers and smaller companies whose profits would be the biggest beneficiaries of a stronger economy have led the way, as coronavirus vaccines roll out and Washington delivers even more financial aid. Those gains are also picking up the slack for technology stocks, which have lost momentum as interest rates rise on worries about higher inflation.

First-time Investors Join, And Game Doesn’t Stop

Stuck at home with little to do, people looked for ways to use some dollars that might have otherwise been spent on a movie, restaurant meal or vacation. Many turned to the stock market via their phones, as trading apps made it easy to buy and sell shares with a few taps, commission free.

Clients under the age of 40 accounted for 35% of trading last month at Charles Schwab, nearly double the rate of two years earlier. Accounts less than a year old are doing more trading in total at Charles Schwab than accounts that have been around more than 10 years.

Many of those traders have been using money they got as stimulus payments from the U.S. government. The Robinhood trading app popular with many novice investors saw an increase in the percentage of deposits of exactly $1,200 or $2,400 after the government sent out checks for those amounts last spring, just after the stock market hit bottom, for example. A new round of government payments — $1,400 to individuals — is underway.

Social media has only amplified the trend, as traders talk on Reddit, Twitter and elsewhere about what stocks to buy. They’ve been helping to push up the stock market broadly, but their influence is most evident in what have come to be known as “meme stocks.” GameStop surged 1,625% in January, for example, even though the video game retailer has struggled financially. The gains for GameStop, AMC Entertainment and other meme stocks defied gravity — and, in the opinion of nearly every professional investor on Wall Street, common sense.

A Spac-tacular Boom Raises Concerns

All the mania around stocks has raised worries along Wall Street that prices may have shot too high. Much of the criticism is focused on how much faster stock prices climbed than corporate profits.

Another potential signal of too much greed and not enough fear: Investors are so hungry for the next big thing that they’re pouring billions of dollars into investments, before they even know what the money could go toward. These investments are called special-purpose acquisition companies, though they’re better known by their acronym, SPACs. Armed with cash raised from investors, SPACs look for privately held companies to buy so that the company can easily list its stock on an exchange.

Last year, SPACs raised $83.4 billion, more than six times the prior year. They’ve already surpassed that level in less than three months this year.

A Global Recovery

The coronavirus really knows no geographic boundaries. As it devastated populations and economies around the world, global financial markets sustained sharp losses.

The recovery has also been worldwide. Stocks from China, South Korea and other emerging markets as a group are up almost the exact same percentage as the S&P 500 since March 23, 2020. Japan’s Nikkei 225 index is also up a similar amount.

European markets have been lagging, although their performance is much better when seen in dollar terms instead of euros. Worsening infection rates are raising worries of a “third wave” on the continent and are forcing governments to bring back some restrictions on daily life. But the hope is that the continued rollout of vaccines will get economies and trade back to normal across the world.

Who’s Getting Left Behind?

Even with so many first-time investors joining the market, not everyone is benefiting from rising stocks. Only a little more than half of all U.S. households owned stocks in 2019, whether by day-trading stocks or holding an S&P 500 index fund in a 401(k) account.

Likewise, not every stock has participated in the market’s run higher over the last year. A handful of stocks within the S&P 500 are actually lower, headlined by Gilead Sciences, which was down a little more than 11% through Friday. The stock soared early in the pandemic as its remdesivir drug became a treatment for COVID-19 but fell back in part on concerns about upcoming patent expirations.

Other early stock winners of the pandemic have also tailed off since the market took off a year ago, including Clorox, whose disinfecting wipes became like currency, and Spam-maker Hormel Foods.

KSL 5 TV Live

Top Stories

National News

FILE: U.S. Secretary of Defense Lloyd Austin speaks during a news briefing at the Pentagon July 21,...
TARA COPP, Associated Press

Keep COVID military vaccine mandate, defense chief says

Defense Secretary Lloyd Austin is making clear he wants to keep the military’s COVID-19 vaccine mandate in place to protect the health of the troops.
1 day ago
(Photo by Bethany Clarke/Getty Images)...
Brian Fung, CNN

Released Twitter emails show how employees handled 2020 New York Post Hunter Biden story

Elon Musk teased Twitter users a few days ago with the promise of information on Twitter's content moderation policies, now known as the "Twitter Files."
1 day ago
The former Utah man and pilot, Dan Ragan....
KSL TV

Utah resident remembers pilot killed in Dallas Air Show crash

The former Utah man who tragically passed away in a deadly air show crash in Texas is being remembered by neighbors and friends. 
1 day ago
Tanner Lynn Horner, 31, a driver working for FedEx was arrested and charged in the kidnapping and k...
Tina Burnside, CNN

Texas FedEx driver is arrested in the kidnapping and killing of a 7-year-old girl

A driver working for FedEx was arrested and charged Friday in the kidnapping and killing of a 7-year-old girl who had disappeared from her home's driveway in Texas earlier this week, police said.
1 day ago
Noodle, the pug, is held....
Zoe Sottile, CNN

Noodle, the TikTok-famous ‘bones or no bones’ pug, has died

(CNN) — Noodle, the geriatric pug who captured hearts across the internet for his “bones or no bones” ritual, has died at age 14, his owner says. Jonathan Graziano, Noodle’s owner, announced that his beloved dog died on Friday, in a tearful update posted to his TikTok and Instagram. “This is incredibly sad, it’s incredibly […]
1 day ago
Rapper Takeoff with a microphone...
LEKAN OYEKANMI and JAKE BLEIBERG Associated Press

Man arrested in fatal shooting of Migos rapper Takeoff

Police in Texas have announced an arrest in last month's shooting death of the performer Takeoff. Houston police said Friday that 33-year-old Patrick Xavier Clark was charged with murder and has been arrested in connection with the rapper's death. Born Kirsnick Khari Ball, Takeoff was the youngest member of Migos, the Grammy-nominated rap trio from suburban Atlanta that also featured his uncle Quavo and cousin Offset. Police have said the 28-year-old was fatally shot outside a bowling alley after a private party. Police said Friday that the shooting followed a dispute over a game of dice, but that Takeoff was not involved and was an innocent bystander.
1 day ago

Sponsored Articles

house with for rent sign posted...
Chase Harrington, president and COO of Entrata

Top 5 reasons you may want to consider apartment life over owning a home

There are many benefits of renting that can be overshadowed by the allure of buying a home. Here are five reasons why renting might be right for you.
Festive kitchen in Christmas decorations. Christmas dining room....
Lighting Design

6 Holiday Decor Trends to Try in 2022

We've rounded out the top 6 holiday decor trends for 2022 so you can be ahead of the game before you start shopping. 
Happy diverse college or university students are having fun on their graduation day...
BYU MBA at the Marriott School of Business

How to choose what MBA program is right for you: Take this quiz before you apply!

Wondering what MBA program is right for you? Take this quiz before you apply to see if it will help you meet your goals.
Diverse Group of Energetic Professionals Team Meeting in Modern Office: Brainstorming IT Programmer...
Les Olson

Don’t let a ransomware attack get you down | Protect your workplace today with cyber insurance

Business owners and operators should be on guard to protect their workplace. Cyber insurance can protect you from online attacks.
Hand turning a thermostat knob to increase savings by decreasing energy consumption. Composite imag...
Lighting Design

5 Lighting Tips to Save Energy and Money in Your Home

Advances in lighting technology make it easier to use smart features to cut costs. Read for tips to save energy by using different lighting strategies in your home.
Portrait of smiling practitioner with multi-ethnic senior people...
Summit Vista

How retirement communities help with healthy aging

There are many benefits that retirement communities contribute to healthy aging. Learn more about how it can enhance your life, or the life of your loved ones.
Overstimulated? Stocks Soar 75% In Historic 12-Month Run