Over-stimulated? Global stocks haven’t seen such a rush since 1936

 Over-stimulated?  Global stocks haven't seen such a rush since 1936

NEW YORK – A year ago, the stock market’s terrifying free fall suddenly came to an end, ushering in one of its biggest races.

On March 23, 2020, the S&P 500 fell 2.9%. In total, the index fell almost 34% in about a month, erasing three years of gains for the market.

That turned out to be the bottom line, even as the coronavirus pandemic worsened in the months that followed and the economy sank deeper into recession. Massive amounts of support for the economy from the Federal Reserve and Congress limited the fall in inventories. The market recovered all of its losses in August.

Over time, the rapid development of coronavirus vaccines has helped stocks soar even higher. The same goes for growing legions of novice investors, who suddenly had a long time to enter the market using free trading apps on their phones.

All of this led to the S&P 500 rising 76.1% and a shocking return to record highs. This seems to be one of the best, if not the best, 365-day run for the S&P 500 since before WWII. Based on month-end numbers, the last time the S&P 500 rose this much in 12 months was in 1936, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.

All this furious move has also raised fears that stock prices have gone too far, too fast. Here’s a look at five trends that have helped shape the market over the past year:


The great Wall Street rally actually had two distinct stages. At first, Big Tech stocks and the suddenly-at-home economy winners pushed the market higher. Amazon benefited from the increase in online shopping, Apple increased sales as more people worked from home, and Zoom Video Communications increased as students and adults began to meet online. Tech stocks as a group are the most important in the market by value, so their gains helped offset weakness in other sectors as the economy continued to struggle.

Since last fall, however, enthusiasm for an economic take-off has sparked a more widespread recovery. Banks, power producers and small businesses whose profits would be the biggest beneficiaries of a stronger economy have led the way, as coronavirus vaccines roll out and Washington provides even more financial aid . These gains are also catching up with the slowdown in tech stocks, which have lost momentum as interest rates rise amid fears of higher inflation.


Stuck at home with little to do, people searched for ways to use dollars that would otherwise have been spent on a movie, a restaurant meal, or a vacation. Many turned to the stock market through their phones, as trading apps made it easy to buy and sell stocks with just a few clicks, with no commission.

Customers under 40 accounted for 35% of trades last month at Charles Schwab, nearly double the rate two years earlier. Accounts less than a year old do more total transactions with Charles Schwab than accounts that have been in existence for more than 10 years.

Many of these traders used the money they received as stimulus payments from the US government. The Robinhood trading app popular with many newbie investors saw an increase in the percentage of deposits of exactly $ 1,200 or $ 2,400 after the government sent out checks for these amounts last spring, just after the stock market hit. the 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 stocks to buy. They helped drive the stock market up generally, but their influence is more evident in what are now called “meme stocks”. GameStop jumped 1,625% in January, for example, even as the video game retailer struggled financially. The gains for GameStop, AMC Entertainment, and other memes defied gravity – and, in the opinion of nearly every professional Wall Street investor, common sense.


The frenzy around stocks has raised concerns along Wall Street that prices may have climbed too high. Much of the criticism centers on how stock prices have soared much faster than corporate earnings.

Another potential signal of too much greed and not enough fear: Investors are so hungry for the next big thing that they are investing billions of dollars in investments, before they even know what the money could be used for. These investments are referred to as Special Purpose Acquisition Companies, although they are better known by their acronym, SPAC. Armed with cash raised from investors, PSPCs seek out private companies to buy so that the company can easily list its shares on the stock exchange.

Last year, PSPCs raised $ 83.4 billion, more than six times the previous year. They have already passed that level in less than three months this year.


The coronavirus really knows no geographic boundaries. By devastating people and economies around the world, global financial markets have suffered severe losses.

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

European markets are lagging behind, although their performance is much better in terms of dollars rather than euros. Worsening infection rates are raising concerns of a “third wave” on the continent and forcing governments to roll back some restrictions on daily life. But it is hoped that the continued deployment of vaccines will bring economies and trade back to normal around the world.


Even with so many new investors joining the market, not everyone benefits from the rise in stocks. Only just over half of all U.S. households held stocks in 2019, whether through day trading stocks or holding an S&P 500 index fund in a 401 (k) account.

Likewise, not all stocks participated in the market rise over the past year. A handful of stocks within the S&P 500 are actually down, such as Gilead Sciences, which is down 9.8%. The stock skyrocketed at the start of the pandemic as its drug remdesivir became a treatment for COVID-19, but declined in part due to concerns about upcoming patent expirations.

Other early winners in pandemic stocks have also slowed since the market took off a year ago, including Clorox, whose disinfectant wipes have become like money, and spam maker Hormel Foods.


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