2020 has been a landmark year for varied reasons. The obvious being the coronavirus pandemic. The stock market too reflected the tumultuous times. Though the coronavirus strain is refusing to fade out, the US stocks closed 2020 on a positive note.
The year has seen the longest bull market and the shortest-lived bear market ever. Experts are of the opinion that this upward swing will continue in the coming year.
There are still concerns about the slow rollout of the vaccines against the virus, the Senate elections and the handover of the presidency, but investors are still gung-ho about the coming year too.
“We are going to continue to see a push higher,” said Commonwealth Financial Network’s head of portfolio management, Peter Essele. He has much confidence in the stocks bull run lasting for a long time.
For Wall Street, 2020 was full of swings. It witnessed the longest bull market in history along with equities taking strong hits by the COVID-19 shutdowns. There were wild swings based on hopes of recovery of the market with the lockdowns easing out.
A lot hinges on the senate majority and who wins it. If Republicans win at least one Senate seat, they will maintain a slim majority.
That would mean passing of tax reforms, which many investors fear would hurt stock prices.
A survey by BofA Global Research in December of various fund managers also said the market will remain bullish. A November poll revealed that investors expected the S&P 500 to end 2021 at 3,900, which would be another annual rise after the index rose about 16.3% in 2020 to 3,756.07. In prior bull markets, the S&P 500 index has experienced a median gain of 38% over the span of 26 months before topping out, according to Bespoke Investment Group data.
The stock market is said to continue going upwards in the future.
The Dow Jones industrial average and the tech-heavy Nasdaq gained 7.25 percent and 43.6 percent, respectively. The Dow and S&P 500 finished at record levels despite the public health and economic crises.
The rally by the US stock markets in the past two months has taken many by surprise, although it has partly sustained its run because of the U.S. Federal Reserve’s accommodative policies, strategists said.
The resurgence has been fueled by the largest federal government stimulus ever. Investors seem to be unfazed by the millions of deaths and the nearly 20 million unemployed in the US, a jobs crisis worse than during the Great Recession.
But there are some managers which feel that the market is overstretched and may have priced itself out and not see any immediate benefits after the end of the virus.
The 12-month forward price-to-earnings ratio of the S&P 500 is currently about 22, well above its long-term average of 15.
Most potential of recovery is seen in stocks of financials, leisure and hospitality, and energy.
“The market, overall, does not seem overbought,” said Tim Ghriskey, chief investment strategist at Inverness Counsel.
“Earnings are going to be used as a confirmation of current pricing,” Essele said.
S&P 500 company earnings are forecast to increase about 23% in 2021 compared with 2020. Goldman Sachs predicts growth of 5.9 percent in 2021 — the best annual increase since 1984.
