A year ago, the longest-ever bull market ended.
The comeback in the stock market since then has been nothing short of astounding.
The S&P 500 took just 126 trading days to swing from a record to a bear market and back to a new high—marking the fastest such recovery in history. That was even as market prognosticators warned stocks were due for another bout of selling, based on the growing death toll and unprecedented job losses caused by the coronavirus pandemic.
The U.S. is still in the midst of the same pandemic that led to the spring selloff. And the market’s future remains mired in uncertainty. Just last week, surging bond yields sent many of the most popular technology stocks of the past decade sliding.
The stock market is now barely above the point where it began the year. This coming week, traders say they will be keenly focused on inflation data, which may add to the recent debate over whether inflationary pressures are picking up.
Whatever the data show, many investors say the ups and downs of the past year have reminded them that some investing truths are eternal. Among them:
The markets look way ahead of us
Stocks bottomed out March 23. The next day, a furious rally sent the Dow up more than 11% for its best session since 1933.
The pandemic was far from over. In the same week, politicians and health experts declared New York City the epicenter of the coronavirus pandemic, the U.K. went into lockdown and Japan postponed the Tokyo Olympics.
How was a market rally possible?
Investors like to cite the adage that markets are forward-looking. There is no clearer example of that in recent memory than what happened last year.
Those buying stocks last spring weren’t necessarily doing so out of a belief that the pandemic was close to an end. They were betting on the future turning out to be better. And they were right. Companies are expected to report a 3.9% increase in earnings for the fourth quarter of last year. That is a modest increase, but nevertheless would mark the first quarter of year-over-year growth since the end of 2019, according to FactSet.
An investor waiting for a clear turning point on the pandemic—say, the first vaccine approval—would have missed much of the market’s ride higher.
“It’s hard, it feels counterintuitive for a lot of investors, but if you only focus on buying things that were loved…
Read More: Covid-19 Crashed the Stock Market a Year Ago. Here Are Some Lessons