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
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.
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.”
The day after the market bottomed, JonesTrading’s chief market strategist Michael O’Rourke warned clients that it was a “dangerous” time to be negative on stocks or fight an accommodative Federal Reserve, while DoubleLine Chief Executive Jeffrey Gundlach correctly assured his followers on Mar. 25 that plenty of upside was ahead.
Yves Lamoureux, the president of macroeconomic research firm Lamoureux & Co. who nailed a panic event of 2018, told MarketWatch on Mar. 17 that the current selloff was about over, but that investors should brace for rolling bear markets into 2022.
And there were other forecasters who called one of the last notable selloffs of 2020. Analysts at Longview Economics, a London-based research firm, warned that the rally from September lows was looking “tired,” while Miller Tabak’s Maley predicted another “downleg” from the September correction.
It was a challenging and rewarding time to be a stock picker in 2020. In June, MarketWatch spoke to Mary Lisanti, president of Lisanti Capital Growth and manager of the Lisanti Small Cap Growth Fund
about overlooked companies.
Her four picks — Inphi
a maker of components for semiconductors and optical platforms, pet food maker Freshpet
cloud contact-center solution Five9
and shoe maker Crocs
— have gained 80% or more in a year.
Another insightful summer call came from Gerald Sparrow, chief investment officer of the $31 million Sparrow Growth, a midcap growth fund, who flagged Teladoc Health
-owned messaging app Snapchat, and streaming device maker Roku
as stocks to own. In one year, those stocks gained upward of 100%.
And disruption was the theme behind four stocks flagged by Alex Ely, chief investment officer of U.S. growth equity at Macquarie Investment Management to MarketWatch last summer. Investing in his picks, mobile-payments provider Square
software-as-a-service media buying platform Trade Desk
outdoor-gear company Yeti
and decking company Trex
would have delivered gains between 80% and more than 200% in a year.
And one last call comes from Capital Wealth’s market strategist Jeffrey Saut, who last summer said he was sticking to his belief of a secular bull market, a long-running trend that can last up to 25 years but is often peppered by smaller bear markets. He predicted a new high for the S&P 500 by year-end. That happened.
MarketWatch will be checking in on 2020’s best calls to see what strategists and money managers are recommending for 2021.