Against many odds, the stock market not only survived a pandemic, but thrived in 2020, making it a tough year to navigate for investors.
The S&P 500
SPX,
closed out the year with a 16% gain, despite more than 80 million COVID-19 infections by the end of 2020 — that number is currently at 95 million — and 1.8 million dead from the disease — global deaths are now over 2 million — and economies upended.
But several strategists and fund managers who MarketWatch spoke to or whose advice we flagged last year via our Need to Know column, made some spot-on calls. That was often due to the fruits of sticking to tried and true systems and beliefs, paying attention to history, and focusing on companies well-placed to ride out the COVID-19 pandemic and beyond.
Calling a correction
The year 2020 was dominated by the stock market’s plunge into a bear market, triggered by the COVID-19 pandemic, and its subsequent surge back to all-time highs. The big drop for stocks came as COVID-19 went from spreading across China to Europe, and borders began to close. Stocks started tumbling on Feb. 20, and the S&P 500 would lose nearly 34% before the correction was over.
A prescient call came on Feb. 24 from Chris Weston, head of research at Australian foreign exchange broker Pepperstone, who had this warning for his clients: “If we see [S&P 500] price head through 3,200, then it will lead to even higher volatility and risk of a 10% drawdown. The bulls need to defend this level or it’s good night Vienna.”
The S&P closed at 3,128.21 on Feb. 25 and spent the better part of the next few weeks selling off, bottoming on Mar. 23.
Read: 15 stock-market winners that index-fund investors missed out on in 2020
Weston wasn’t alone. On Feb. 6, Miller Tabak + Co.’s lead strategist Matt Maley spoke to MarketWatch about a 10% drop that he saw coming, while Goldman Sachs’ chief global equity strategist Peter Oppenheimer warned clients on Feb. 21 that “risks of a correction are high.”
Even earlier warnings came from Saxo Bank’s head of equity strategy Peter Garnry, who told MarketWatch on Jan. 21 that he was seeing a setup “eerily similar” to one that led to a selloff in January 2018, though he also correctly predicted equities would march higher than that.
And after flagging a potential rout to come for technology stocks in late January, Tony Dwyer, a longtime bull and strategist at brokerage Canaccord Genuity, correctly said on Mar. 13 that the bulk of the stock selloff had happened, and a bounce was coming.
The bottom and charting it out
Examining the past proved useful for followers of Michael Batnick, director of research at Ritholtz Wealth Management. On Mar. 19, he laid out several examples of charts that showed how previous corrections had eventually ended, saying “it doesn’t matter when you buy, only that you buy.”
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