Global Economics

Wall Street closes out a stormy year near record highs

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Wall Street closed near record highs in light trading on Friday, the last trading day of 2021, marking the second year of recovery from a global pandemic. All three major U.S. stock indexes scored monthly, quarterly and annual gains, notching their biggest three-year advance since 1999.

The S&P 500 gained 27% since the last trading day of 2020. Through Thursday, the benchmark index has registered 70 record-high closes, or the second-most ever. Using Refinitiv data back to 1928, the most record-high closes for the S&P 500 in a single year was 77 in 1995.The Dow added 18.73% for the year, and the Nasdaq gained 21.4%.

Companies, consumers, and the broader economy thrived in 2021 as they navigated a constantly shifting landscape, including a tumultuous power transition marked by the Jan. 6 Capitol riot. Other factors included the “meme stock” phenomenon, new COVID-19 variants, a labor shortage, generous fiscal/monetary stimulus, hampered supply chains, booming demand, and price spikes as a result. “What stands out to us this year among all the negatives, is the resiliency of Corporate America,” said Ryan Detrick, chief market strategist at LPL Financial (NASDAQ:LPLA) in Charlotte, North Carolina. “In a sea of uncertainty and higher prices, you have to be extremely impressed by how agile and adaptive Corporate America was to sport 45% earnings growth in a very difficult year.”

Indeed, earnings results from S&P 500 companies blew past analyst estimates, delivering year-on-year growth of 52.8 percent, 96.3 percent, and 42.6 percent in the first three quarters of the year, respectively, according to Refinitiv, which currently sees fourth-quarter annual earnings growth of 22.3 percent. Energy (SPNY), real estate (. SPLRCR>, and microchips (SOX), all sectors associated with economic recovery and brisk demand, were among the top performers in 2021, with growth stocks (IGX) outperforming value stocks (IVX) by 31 percent.

Market-leading tech and tech-adjacent megacap stocks that outperformed the broader market in the first year of the global health crisis were laggards as the economy gradually reopened and vaccines were deployed.