Jan 4, 2022 - Economy

The market's best three years since '99

Annual change in S&P 500 price, 1979 to 2021
Data: FactSet; Chart: Kavya Beheraj/Axios

2021 was a dozen spiritually debilitating months of disruption and sickness — but also a hopeful time of vaccination, resilience and recovery. Either way, the market loved it.

The big picture: The S&P 500 jumped nearly 27% last year, underpinned by super-supportive monetary policy from the Federal Reserve and hopes for forthcoming Federal spending from the Biden administration. It was the third straight double-digit showing for the benchmark index.

  • As of Dec. 31, the S&P was up more than 90% over the last three years, its best three-year stretch since 1999.

Why it matters: Even casual market historians might find the comparison with 1999 concerning, as it was almost the exact moment when the dot-com era tilted from boom to bust.

  • The actual high-water mark was March 24, 2000, after which the market suffered a slow-moving crash that sank stocks roughly 50% over the next couple of years.

State of play: Few analysts on Wall Street foresee a similar cataclysm in the offing. (Although few Wall Street analysts who predict crashes remain employed.)

  • Analysts think the S&P 500 will rise about 10% in 2022, according to FactSet data. It’s just a guess, but, sure, why not.

The bottom line: With little clear direction at the moment, investors are crowding into some of the same mega-cap tech stocks — Apple, Alphabet, Microsoft, and most recently, Tesla — that in recent decades have proved immune to pandemics and economic cycles alike.

  • Those four companies alone contributed more than 25% of the total return S&P 500 investors enjoyed in 2021, according to data from S&P Dow Jones Indices.
  • A rally in those shares briefly pushed Apple’s market value over $3 trillion for the first time on Monday.
Data: YCharts; Chart: Axios Visuals
Data: YCharts; Chart: Axios Visuals
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