On March 23, 2020, almost exactly two years ago, the U.S. stock market reached its lowest point of the COVID-19 pandemic-induced plunge. It was less than three months into the year. But already the S&P 500 was down more than 30% year to date.
Since then, the market has staged an epic rally even when factoring in 2022’s sell-off. The period from March 2020 to March 2022 has arguably been the most unique two-year performance in stock market history, as seemingly every kind of investing style and stock market sector has had its moment in the spotlight — even if only for a matter of months. From meme stocks, to hypergrowth stocks, to stodgy value stocks. From large-cap giants to small-cap up-and-comers. And from technology and consumer discretionary to energy and financial stocks.
Over the short term, terrible strategies sometimes work amazingly well, while methodical calculations can lose money. Put another way, anyone can look like a genius for a while. However, the investors with the best long-term track records don’t dip in and out of what’s working or not working. Rather, they stick to their processes and put in the work, letting time work in their favor.
Here’s what separates lucky trades from legendary investors, and what the last two years can teach us about human nature and the stock market.
Image source: Getty Images.
2020’s winners and losers
Between 2019 and 2021, the U.S. stock market doubled. Despite 2020’s plunge, the S&P 500 finished the year with an 18.4% total return then followed that performance with a 28.7% total return in 2021.
In 2020, the spotlight shone brightest on hypergrowth stocks, cryptocurrency, pandemic winners like Peloton Interactive and Zoom Video Communications, and renewable energy. Meanwhile, oil and gas stocks tumbled; value was underperforming growth; and the tech-fueled Nasdaq-100 was crushing the S&P 500.
2021’s winners and losers
The overall market did even better in 2021. But it was led higher by a different cohort of winners. Meme stocks like GameStop and AMC Entertainment and special-purpose acquisition companies (SPACs) soared, with most hitting their highest levels in February 2021.
Meanwhile, Bitcoin and Ethereum continued to crush the market after rebounding from a brutal sell-off over the summer. The same pandemic winners that had led the market in 2020 were now selling off big time. Zoom and Peloton, for example, went from market outperformers (stocks expected to yield better returns than the overall stock market) to severe underperformers (stocks whose returns are worse than the overall stock market). What’s more, the energy sector, which had been the worst-performing sector in 2020, was the single best-performing sector in the S&P 500 in 2021, while most renewable energy stocks finished the year down. Profitable large-cap tech stocks like Apple and Microsoft continued to gain and lead the market higher, helping the Nasdaq Composite beat the S&P 500 despite the underperformance from smaller tech stocks.
2022’s winners and losers
In 2022, low oil and gas supply paired with much higher demand is resulting in a sustained boom in oil and gas stocks. The broader markets remain down for the year. But interestingly enough, the Vanguard Value ETF is actually up for the year, while the Vanguard Growth ETF is down over 12% as investors shift away from Cathie Wood-style growth stocks toward Warren Buffett-like value stocks. Meanwhile, crypto has sold off; meme stocks are still down big off their highs; and pandemic winners keep falling too as rising interest rates paired with valuation concerns continue to pressure unprofitable growth stocks. Renewable energy continues to underperform oil and gas.
Adding it all up
It’s worth mentioning that the conclusions we are drawing involve categorizing companies, so of course, some individual securities will be performing differently from their respective industries. But in general, the below table summarizes how each of the discussed categories performed in 2020, 2021, and so far this year.
Category
2022
2021
