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2020 was an extraordinarily eventful and life-changing year. All the lockdowns, deaths, politics, and social distancing have taken their toll on us all. The good news is that the year is over, and everyone is hopeful the madness will soon end.
But bulls are hoping the stock bubble madness never ends.
Who would have thought that pandemics were so damn bullish? Let’s review the events that took investors and traders on a very wild ride.
A Look Back at the 2020 March Crash
One of the most dramatic stock market crashes in history happened in March of 2020. The market reaction was caused not directly by COVID-19 but by the government’s handling of the matter.
The decision to shut-down businesses (mainly small businesses) and enforce strict quarantines ignited unemployment levels to unbelievable highs.
The S&P 500 and DJIA crashed nearly 30% in its fastest fall in financial history. This mind-boggling drop created a short-lived bear market that quickly ended in April. One would think the bear would last much longer. It definitely would have if the markets were not rigged. (They are and always have been.)
Such a fierce market drop fueled by economic devastation only to abruptly end left many perma bears disappointed.
The Price of Oil Went Negative
At the beginning of 2020, the price of crude oil was about 60 dollars a barrel. Then the world basically closed, causing oil demand to collapse. The May oil futures contract dropped into negative territory for the first time in history.
The low was as extreme as -37.63 per barrel. Cars, jets, factories, and more were all put to a halt causing major storage concerns. The oil industry as a whole took a massive hit from the pandemic.
The Federal Reserve was more than ready to step in and prop the markets back up. On March 15th, the Fed Funds rate was cut to zero. On the same day, they began buying assets on the largest scale ever, known as QE infinity.
They promised to buy at least $700 billion in assets with no limit or definite timeline to stop.
The massive buying of bonds/junk bonds, ETFs, and more provided a significant liquidity boost. And with rates at zero, investors piled back into stocks.
Stocks to the Moon
Since the Fed intervened, most stocks not only recovered but blasted off into the galaxy. Everyone and their mom began to get rich buying stocks. No due diligence was needed. If it had a ticker symbol, all you had to do was buy.
Companies that would perform well in the “new normal” like tech and so-called “stay at home stocks” more than tripled in price. Robinhood traders began to embarrassingly outperform hedge funds.
Investors that looked to economic data, fundamental analysis, and logic didn’t fare well in 2020. (Why hedge funds underperformed dumb retail traders). The experience was quite entertaining and frustrating to witness.
The Fed bolstered the everything bubble continuing to make the wealthy even wealthier. Most people are too distracted or unaware of the central bank to even notice.
Despite the majority of stocks reaching new highs, a few industries are struggling to survive. Hospitality, transportation, commercial real estate, and energy (oil) have yet to make a significant comeback.
Death to Small Business
We are still far from getting back to normal. Most of the US is in a state of being half-closed. Small businesses that don’t operate online have had the worst year. Many were and still are being forced to shut down while major corporations can remain open.
To make matters even worse, corporations are getting bailed out while small businesses have only gotten a shred of stimulus. It’s sad that the handling of the pandemic coincidentally destroyed small businesses across the country.
December 2020 US Market Performance
December 2020 Market News Recap
Tesla shorts are on fire. Shares of the super hip company led by meme master Elon Musk rose as much as 700% in 2020. Short sellers lost nearly $38 billion as the stock rallied on. The company is worth more than Toyota, Volkswagen, General Motors, and Daimler Chrysler combined.
Moar Stimulus! In the very last days of 2020, congress finally passed a second stimulus bill. The controversial bill had many questionable additions, including $10 million for gender programs in Pakistan. Another stimulus check was also included but the amount was only $600. The meager offering of free money pissed many people off. President Trump and Democrats both wanted $2000 to be sent out and are still pushing the senate to increase the amount.
Alibaba founder Jack Ma is in hot water. Jack Ma’s comments about Chinas financial regulations have upset leader Xi Jinping. Xi has retaliated by blocking the IPO of Ant financial group (Alibaba owns a third of the company) and put Alibaba under regulations review. Shares of BABA have since fallen 30% from their record highs.
Vaccines have arrived. The rollout of FDA approved vaccines from Pfizer and Moderna began mid-December. The long-term effectiveness and side-effects of the newly created vaccines are still yet to be seen. We hope the vaccines mean the end of the pandemic, but the goalposts continue to move.
Bitcoin joins the party. It’s not a true everything bubble if the highly speculative digital asset/currency/commodity hasn’t joined. Luckily for crypto enthusiasts, Bitcoin has erupted to new highs along with stocks. Propelled by greed and fear of a dollar collapse, the cryptocurrency is gaining widespread popularity.
The 737 MAX death box is back in the air. After almost two years of being grounded, the flawed Boeing aircraft is back in use. American Airlines COO David Semour stated, “It’s not rushed. Everything we do at American is all surrounded by safety.” Yet, victims of the two fatal crashes beg to differ.
Government and big tech infected by SolarWinds hack. The IT management company SolarWinds was hacked via malware in its updates. Federal government networks, including the US treasury, were affected. Microsoft, Intel, Nvidia, and others have also claimed to be victims of the hack. Government officials are pointing to Russia as the perpetrator.
The Apple iCar? What was once a crazy rumor is now becoming less crazy. The iPhone maker has created an electric car project codenamed “Titan.” The company has developed several patents related to vehicles pointing to an autonomous EV. Apple has been mostly silent on the project, so an actual iCar isn’t confirmed. For now, it is still just speculation.
Banks can resume share buybacks. The Fed is allowing big banks to continue buybacks after passing the second round of stress tests. JPMorgan Chase immediately announced a share repurchase program of $30 billion.
IPOs are still very hot. Airbnb, DoorDash, Wish, and more all went public in December. Retail traders quickly gobbled up shares, but the valuations are very high. More highly anticipated IPOS are expected soon. Upcoming public offerings include: CoinBase, Robinhood, Roblox, Bumble, Petco, Instacart, and more. Party like it’s March of 2000, right?
The Zuck is getting cucked by the FTC. The mighty Facebook empire ran by Mark Zuckerberg is in Danger. The FTC is suing the social media giant for illegal monopolization. The lawsuit could require the company to sell Instagram and WhatsApp. Facebook would also need to seek approval before conducting any future acquisitions.