Covid-19 Fuelled S&P 500 Selloff Last Year. Here Are Some Lessons Learned.
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Covid-19 Fuelled S&P 500 Selloff Last Year. Here Are Some Lessons Learned.

Money managers reflect on what the ups and downs of 2020-2021 have taught them.

By Akane Otani
Mon, Mar 8, 2021 1:22amGrey Clock 4 min

A year ago, the longest-ever bull market ended.

The comeback in the stock market since then has been nothing short of astounding.

The S&P 500 took just 126 trading days to swing from a record to a bear market and back to a new high—marking the fastest such recovery in history. That was even as market prognosticators warned stocks were due for another bout of selling, based on the growing death toll and unprecedented job losses caused by the coronavirus pandemic.

The U.S. is still in the midst of the same pandemic that led to the spring selloff. And the market’s future remains mired in uncertainty. Just last week, surging bond yields sent many of the most popular technology stocks of the past decade sliding.

The stock market is now barely above the point where it began the year. This coming week, traders say they will be keenly focused on inflation data, which may add to the recent debate over whether inflationary pressures are picking up.

Whatever the data show, many investors say the ups and downs of the past year have reminded them that some investing truths are eternal. Among them:

The markets look way ahead of us

Stocks bottomed out March 23. The next day, a furious rally sent the Dow up more than 11% for its best session since 1933.

The pandemic was far from over. In the same week, politicians and health experts declared New York City the epicentre of the coronavirus pandemic, the U.K. went into lockdown and Japan postponed the Tokyo Olympics.

How was a market rally possible?

Investors like to cite the adage that markets are forward-looking. There is no clearer example of that in recent memory than what happened last year.

Those buying stocks last spring weren’t necessarily doing so out of a belief that the pandemic was close to an end. They were betting on the future turning out to be better. And they were right. Companies are expected to report a 3.9% increase in earnings for the fourth quarter of last year. That is a modest increase, but nevertheless would mark the first quarter of year-over-year growth since the end of 2019, according to FactSet.

An investor waiting for a clear turning point on the pandemic—say, the first vaccine approval—would have missed much of the market’s ride higher.

“It’s hard, it feels counterintuitive for a lot of investors, but if you only focus on buying things that were loved in the past, you’ll always be buying high and selling low,” said Don Calcagni, chief investment officer of Mercer Advisors.

The moment was also fleeting for stay-at-home stocks. Many of them soared in the first half of last year. But as scientists pushed closer to developing safe and effective vaccines, momentum for those trades faded. Domino’s Pizza Inc., Zoom Video Communications Inc. and McCormick & Co. have one thing in common: their shares peaked last fall.

What was bad news for stay-at-home stocks was good news for companies in the travel business, which began rallying in the final months of 2020. While the S&P 500 is essentially flat this year, Norwegian Cruise Line Holdings Ltd., American Airlines Group Ltd. and Delta Air Lines Inc. have notched double-digit increases on a percentage basis.

Cycles move quickly

If last year’s selloff felt like it happened with vicious speed, that is because it did. It took just 16 trading days for the S&P 500 to fall from its Feb. 19 record into a bear market, or a 20% drop from that high. That marked the index’s fastest-ever such descent, according to Dow Jones Market Data.

The comeback that followed was also historically swift. (Though it probably didn’t feel like it for weary traders.)

“You’re really going to either have to play the speed game all the way around, or you gotta grin and bear it, be patient and just hang on and really stick to your buy and hold strategy,” said Richard Grasfeder, senior portfolio manager at Boston Private.

The pace of the action in more speculative corners of the market—think bitcoin, dogecoin or any of the “meme stocks”—has been even wilder.

On Jan. 28, for instance, GameStop Corp. started the trading day at $265, down 24% from the prior afternoon. It swung as high as $483 and as low as $112.25 before ending the day somewhere in between at $193.60.

“The fact that with technology, information moves so fast…I think you can make the case that it has really sped up market cycles,” said Ben Carlson, director of institutional asset management at Ritholtz Wealth Management.

Stock pickers love volatility, but it doesn’t always love them back

The feeling that markets are moving faster than ever should be a boon to active managers. Analysts have long argued that the professionals have the best opportunity to prove themselves when there is plenty of dispersion: meaning the gap between the market’s losers and winners is wide.

But that didn’t pan out in the first half of 2020, a period rife with volatility. Just 37% of U.S. large-cap equity funds managed to beat the S&P 500 over the first six months of last year, according to S&P Dow Jones Indices. (The firm hasn’t yet released its full-year report on active managers.)

Will stock pickers buck the trend in 2021?

So far, they are off to a good start. Bank of America found 70% of U.S. large-cap mutual funds beat their benchmarks in February, the highest share since 2007.

Much of that outperformance appears to have been driven by the fact that technology stocks have underperformed lately. Technology has a big pull on market cap-weighted indexes like the S&P 500, so active managers who haven’t heavily weighted the sector in their own funds have historically struggled to beat the market. This year, it seems a number of fund managers got the timing right. Many are holding on to more shares of companies like banks, utilities and energy producers, which have held up better in the market pullback.

On the other hand, investors who have made a name for themselves betting big on technology have been stung by widening losses. Among the highest-profile casualties of the past few weeks: Cathie Wood’s ARK Investment Management LLC, whose funds have sizable holdings in companies like Tesla Inc., Roku Inc. and Square Inc.

The growth versus value debate has played out countless times over the past decade, with little reward for value investors. But with rising interest rates putting pressure on long-loved corners of the market, money managers like John Allen, chief investment officer of Aspiriant, are feeling hopeful.

“We believe this is going to be a decade where active investing prevails,” Mr Allen said.


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Milestone birthdays and anniversaries, weddings, and graduations are momentous life occasions that some like to mark with large and elaborate celebrations.

And the deep-pocketed set are still in catch-up mode after a party-throwing standstill during the pandemic that went on for many months during the height of the lockdowns and social distancing. Bashes since then have become ever more extravagant and experiential—mere get-togethers, they’re not.

Hosts are also seeking any excuse to throw an event and having parties with the same “wow” factor for far less significant reasons, or for micro-occasions as they’re called, and even “just because,” according to luxury event planners who work with this elite set.

Colin Cowie, a planner based in New York and Miami who regularly orchestrates multimillion-dollar gatherings and was behind Jennifer Lopez’s and Ben Affleck’s wedding, calls it the “event revolution.”

“Large-scale events have become the norm,” Cowie says. “The wealthy, who are used to celebrating their life moments in a big way couldn’t do anything during the pandemic and are now going all out for anything they host.”

His company, Colin Cowie Lifestyle, plans 30% more events today than pre-Covid and has a lineup booked for the next two years. An example includes an upcoming million-dollar dinner party in the Hamptons simply to socialise with friends. It’s an affair with free-flowing Dom Perignon, centre-cut filet mignons, and unlimited caviar.

Colin Cowie Lifestyle plans 30% more events today than pre-Covid
Calen Rose

Other high-end planners also attribute the rise of over-the-top celebrations to a “live life to the fullest” attitude that’s become prevalent in the last few years. But they say that these parties aren’t necessarily about spending more than before—rather, they’re increasingly creative, thoughtful, and, with respect to weddings, longer.

Lynn Easton, a Charleston-based planner, says that her typical wedding used to span two days and entailed a rehearsal dinner plus the wedding itself. “Now, it’s a five-day bonanza with events like a groomsman lunch,” Easton says.

Easton also plans glitzy milestone birthdays such as one for a 60th where the host flew 60 friends and family to a private island. Dinners were multi-hour affairs in various locations around the isle with the showpiece being a five-course meal where the food was presented on dishes that were hand-carved in ice.

Another planner, Victoria Dubin, based in New York and Miami, says that, in a new precedent, the weddings she’s tapped to design kick off with striking welcome meals. She recently planned an al fresco rehearsal dinner at the Brooklyn pizzeria Roberta’s that recreated a Tuscan garden. Elements included potted herbs, lemon trees, vintage olive oil cans, ceramic plates, and table cards presented with palm leaves in limoncello cans.

Another planner, Victoria Dubin, recently planned an al fresco rehearsal dinner at the Brooklyn pizzeria Roberta’s that recreated a Tuscan garden.
Aletiza Photo

Pashmina shawls hung from chairs to keep guests warm, and freshly baked pizzas and Aperol spritzes were in ready supply throughout the evening.

Stacy Teckin, the groom’s mother, hosted the party with her husband, Ian, and says she sought to pull off a dinner that made an impression on their guests. “The wedding was delayed because of Covid, and now that we had the chance to celebrate, we wanted to go all out,” Teckin says. “I’m not sure we would have done that before.”

In another example, acclaimed planner Norma Cohen threw a wild safari-themed bar mitzvah for a client.

A four-day wedding in Paris where the ceremony was in a historic chateau and the host paid for guests to stay at Hotel Crillon
Norma Cohen Productions

The memorable occasion transpired at Spring Studios in downtown Manhattan and saw 400 guests be transported to the African plains: Details included mammoth replicas of wildlife such as giraffes and elephants, servers in safari themed attire, and entertainment dressed like giraffes. The event was one of several over-the-top parties Cohen’s arranged recently.

A four-day wedding in Paris where the ceremony was in a historic chateau and the host paid for guests to stay at Hotel Crillon, one of the city’s most luxurious properties, also ranks high in Cohen’s memory.

Then there’s a destination party in London that Cohen planned for a client who was turning 40. It as a six-day affair with dinners at swanky spots such as Cipriani, the Arts Club, and Cecconi’s at Soho House. The finale was Lancaster House, a mansion in St. James, where guests were entertained by cabaret dancers from the famed Ibiza club Lio Ibiza and feasted on prime rib and lamb chops and imbibed on Krug champagne.

“People today don’t want to host events,” Cohen says. “They want experiences that take you away to a different place and make you forget that the real world exists.”