This is what many investors found hard to believe at the sale in March: 2020 will be a top year for the stock market.

The Dow Jones Industrial Average ended the year at a record high, an increase of 0.7% on Thursday, as did the S&P 500, which ended the year at a new high, an increase of 16%. The IPO market is booming. A few weeks ago, a tenant of the local start-up…

Airbnb Inc.

made such a brilliant stock market debut that the CEO was briefly speechless on live television.

Such things are easy to imagine in times of boom. But 2020 was anything but for the world outside Wall Street. The cold reality is that the market recovery took place in the midst of a catastrophic pandemic that claimed the lives of more than a million people, disrupted trade and travel and damaged the economy. While there are many reasons for the market’s return, not the least of which is the Fed’s massive intervention, the dizzying recovery is still difficult for many investors to understand.

The road we took to get here is something we would never, ever, ever expect.

Ralph Bassett,

Head of North American Equities at Aberdeen Standard Investments.

Here are the lessons that investors have learned from a memorable year.

Markets do not fully reflect the economy

When the shares were sold on the 23rd. March reached its lowest point and began to rise, with many observers remaining perplexed. The number of coronavirus cases has increased. Restaurants, shops and theaters remained in the dark and millions of Americans queued outside the unemployment offices to apply for unemployment benefits. How come the market is doing so well when the world is going so badly?

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The theatre in Madison, Virginia was one of the many theatres closed during the first attacks of the pandemic in March, along with restaurants and shops.

Photo:

Steve Epps/Wisconsin State Journal/Associated Press

Reply: The stock market often starts to recover much earlier than the economy. In the case of the financial crisis, American shares fell by 9 percent. March 2009. But it has been seven years since the unemployment rate fell below pre-crisis levels.

Although stocks could be replenished in 2020, many economists do not expect the United States to recover all the jobs lost during the pandemic until 2023 or later.

Many have said that the market is no longer in line with reality, but shares are quoted in what will happen in six months to a year, not as the economy looks today, he said.

Andrew Slimmon,

Managing Director and portfolio manager at Morgan Stanley Investment Management. During the pandemic, investors betting on a spring recovery didn’t think the economy would recover any time soon – they thought it would be better in a few months than it was then. And they were right.

It’s only after a big meeting like this that people suddenly realize Oh, the stock market isn’t wrong, I was wrong, Mr. Slimmon said.

It is not worth trying to bring time to market.

During the pandemic and the financial crisis, those who sold the bad news and waited for the recovery of the economy to return to the market missed most of the equity rally, he said. History shows that even if the situation is emotionally charged, the vast majority of investors have an interest in not trying to enter the market.

The return for a hypothetical investor who invested $10,000 in an S&P 500 index fund in early 1980 and missed the best five market days until the end of August 2020 would be 38 percentage points lower than an investor who remained invested throughout the period, according to analysis by Fidelity Investments Inc.

What should a long-term investor think about in the coming year or two, will the economy grow? Will operating income increase? We think the answer to those questions is yes, and that’s why we think the market has a pretty good foundation, he said.

Kelly Bogdanova,

Vice Chairman, Portfolio Advisory Group, RBC Asset Management.

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Because of the elections in November Joe Biden could become president, but as expected the Democrats failed to gain control over Congress.

Photo:

Erin Scott/Bloomberg News

Predictions are only predictions.

Around this time last year, leading strategists on Wall Street considered the deteriorating trading relationship between the United States and China to be the biggest risk to markets. By 2020, trading had virtually disappeared for many asset managers and was quickly replaced by the fear of a coronavirus pandemic and a subsequent economic downturn.

They also predicted a largely modest return for the S&P 500. But in March, analysts at BMO Capital Markets and Oppenheimer Asset Management said they were suspending their targets for the end of the year because the market outlook had become so difficult. Others lowered their targets after the spring sales, only to raise them again after the summer rally.

The Goldman Sachs Group Inc.

The annual target was reduced to 3,000 in March and then increased to 3,600 in August and 3,700 in November. The index ended the year at 3756.07.

Then, of course, the election brought with it its own erroneous predictions that the Democrats would take control of Congress in a blue wave.

Numerous examples of abusive conversations show that one can learn humility in the markets, which proves time and again that the smartest investors and strategists are wrong.

You always think about what we mean by typical variables like macro-economic policy, fiscal policy, global growth? but what usually happens in large movements are invisible shocks, said Aberdeen Bassett.

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Tesla became the most valuable car manufacturer in the world in 2020.

Photo:

Zheng Huanxong/Xinhua/Zuma Press

Technical trade continues to grow

Investors who predicted a long-term increase in value were wrong again.

2020 is the year of electric vehicles

Tesla Inc.

has become the most valuable automaker in the world, and Airbnb made its debut on the stock market with a higher rating than that of

Marriott International Inc,

Hilton Worldwide Holdings Inc.

и

Hyatt Hotels Corp.

combined. It was also a year in which many technology companies benefited disproportionately from a pandemic that forced people to spend more time at home and online.

Zoom Video Communications Inc.

increased by 396% over the year, about 24 times the growth of the S&P 500.

Etsy Inc.

have increased by 302%.

PayPal Holdings Inc.

increased by 117%.

The Dow Jones Industrial Average has reached the limit of 30,000. Jason Bellini of WSJ explains how it happened and what the figure of 30,000 says about the state of the stock market. Photographic illustration: Laura Kamerman.

The hunger for new listed technology stocks was even more surprising – so much so that several companies, including Roblox Corp, decided to postpone their planned IPO to try and better understand how to value their shares.

This is the kind of scenario that can make investors feel that the safest game on the stock market is to simply bet on the fastest growing technology stocks.

SHARE YOUR IDEAS

How will the lessons of 2020 affect financial markets in the coming years? Take part in the discussion below.

There is no doubt that a growth investor has overlooked some of the cheaper and older stocks that have benefited from the pandemic, such as B.

Clorox Co.

or

Domino’s Pizza Inc.

Fund managers, who focus primarily on growth stocks, have also suffered the disadvantage that they have been particularly hard hit during the recent market declines, such as in November, when

Pfizer Inc.

has released promising news about his Covid-19 vaccine. Actions, including increases and enhancements.

Interactive Platoon

was one of the worst days of the 9th. In November, logging rates fell by double digits, but in the following weeks they rose rapidly again.

But all this does not necessarily mean that 2021 will be the year in which the shares regain their old value. Society as a whole was already more technologically oriented for the pandemic, Bassett said. The end of the coronavirus pandemic will not be a panacea for companies already in difficulty in sectors such as the oil trade and the retail sale of bricks and mortar.

I advise not to buy companies that were unpalatable to Covid, said Slimmon.

2020 Market overview for year

2020 Market overview for year

Email Akane Ohtani at [email protected]

Copyright ©2020 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8

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