Best Stock Market Recovery Ever

Year Ends With Record High

The stock market ended 2020 at a record high as the S&P 500 rose 64 basis points. Tesla was up 1.57% to a new record. This was the stock of the year. It now has a $669 billion market cap. Investors highly doubt it will have a great 2021. It may even crash and burn soon. The table below shows the maximum drawdowns in the S&P 500 each year. The market had the highest drawdown ever in a year where it increased.

The S&P 500 rose 16.26% in 2020. It was a moderately better year than average which is impressive given the recession and deadly pandemic. That's not predicting doom and gloom for the market because some think there will be a sector rotation. 

If the energy and bank stocks rally sharply, we could avoid a massive blow up. That being said, anticipated 5% losses in the S&P 500 and 15% losses in the Nasdaq would crush some speculators since the software names will underperform. 

That might be overemphasizing the difference between the Nasdaq and the S&P 500. After all, the S&P 500 was also driven by FAMNG. 57% of the S&P 500’s returns were driven by Apple, Microsoft, and Amazon. Tesla is going to have a huge impact on the index one way or the other in 2021.

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Some Software Stocks Are Already Down A Lot

As you can see from the chart below, 33 stocks in the Nasdaq 100 had 50% returns or more this year which is 1/3rd of the index. That’s the most since 2013 when 34 firms were up 50% or more. Given all the amazing data that shows this is the most speculative market since the late 1990s, 

Some investors are slightly disappointed we didn’t beat the 2013 level (the Nasdaq 100 rose 37% in 2013 which was much less than this year’s gain of 47.6%).

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There has recently been a decline in some of the software stocks as investors realize the work from home trend was temporary and that fewer people will shop online when stores are fully reopened and you don’t need to wear masks to go in them. Specifically, Zoom stock was down 4.6% on Thursday, putting it down 40.7% since its peak in October. 

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