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A dismal economic year, unless you were on Wall Street

The world might be waiting on a #Covid-19 vaccine, but thanks to policy booster shots, the stock market ended 2020 seeming to be largely immune from the contagion that still threatens #Main #Street businesses.

#It might be hard to recall now, but 2020 started off with an economy full of potential: The #Dow #Jones #Industrial #Average was on track to break through the 30,000 threshold and the unemployment rate fell to 3.5 percent — the lowest in more than half a century. #But things were already starting to unravel as an ominous viral pneumonia worked its way around the globe.

The #Dow closed at a record high of 29,551 on #Feb. 12 — then the patient took a turn for the worse. #On #March 9, 12, 16 and 18, circuit breakers designed to halt trading if the S&P 500 dropped by more than 7 percent kicked in when markets plunged. The market hit its nadir on #March 23, with the S&P closing just above 2,237 and the #Dow #Jones a fraction below 18,592.

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The #Federal #Reserve issued a flurry of announcements detailing emergency measures it was undertaking to backstop a number of behind-the-scenes markets, pledging to buy bonds and keep interest rates near zero, as an event that began as a public health crisis threatened to metastasize into a financial crisis.

#On #March 27, #President #Donald #Trump signed into law the $2.2 trillion CARES #Act, a rare act of bipartisan #Congressional collaboration that provided enhanced unemployment insurance payments, forbearance on debts, suspensions of foreclosures and evictions, loans and grants for small businesses and payments of up to $1,200 for individual #Americans.

The enormous, multitrillion-dollar scope of the rescue efforts along with the speed of implementation steadied the economic underpinnings of the market, and assisted in calming investors.

“I think the original bailout had a huge impact on the market. I believe without that package, we would not have bounced back,” said #Joseph #Heider, president of #Cirrus #Wealth #Management.

#In the ensuing months, a sharp — and for many, maddening — bifurcation took place as #Covid-19 swept through the country in waves of mounting severity. The stock market clawed back its early-2020 gains and more, with the #Dow #Jones soaring above 30,000 for the first time in #November.

#On the ground, however, the economic picture looked far less celebratory for millions of #American families. “There’s definitely a difference between what’s happening in the market and what’s happening in the real economy,” said #Charlie #Ripley, portfolio manager and senior investment strategist at #Allianz #Investment #Management.

The unemployment rate receded from its #April peak of 14.7 percent, but remained elevated, particularly for #Black and #Latino workers, whose #November unemployment rates were 10.3 percent and 8.4 percent, respectively.

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#Even as the personal savings rate soared, bolstered by expanded unemployment benefits, forbearance programs and a sharp contraction in the service economy due to shutdowns, half of #American families lost income as a result of the pandemic. #More than two in five of those had not recovered that lost income as of #December, according to a survey. The losses were concentrated among the poorest #Americans, who also anticipated the impact of longest duration: 41 percent of respondents with household income below $40,000 said their income would either take more than a year to recover, or would never recover at all.

“I think people were really shocked that the stock market recovered so well while the economy was doing so badly. #But capital markets are a very cold, emotionless thing.”

#Mitchell #Goldberg, president of #ClientFirst #Strategy, said technical features of the way the major stock indices are designed accounts for much of the baffling divide between #Wall #Street and #Main #Street.

“The way the market mechanics work, the S&P in particular, is designed to show the performance of the biggest stocks, not to reflect the performance of the economy,” he said. #Both the S&P and the tech-heavy #Nasdaq are market-cap weighted, meaning that the bigger the company, the more impact its stock value fluctuations have on the performance of the index as a whole.

There were a couple of additional factors driving stocks higher in 2020. #Goldberg credited the introduction of fractional shares and commission-free trading platforms like #Robinhood with generating interest among a new, often younger crop of retail investors. The #Federal #Reserve’s interventions also kept fixed-income returns very low. #Investors — whether big institutions like pension funds or just workers accruing retirement nest eggs in IRAs — had few choices other than equities to seek out meaningful returns.

#As 2020 drew to a close, investors had two new reasons to breathe a sigh of relief: #Certainty about the outcome of the presidential election, and good news on the #Cover-19 vaccine front. The stock market always looks forward, and analysts said this is driving loftier valuations — even as politicians like #President-elect #Joe #Biden and public health experts warn of a grim winter for the country.

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#Goldberg acknowledged that this disconnect can be frustrating, even alienating for the many #Americans wondering what happened to their jobs, their savings accounts and their financial security.

“I think people were really shocked, and a lot of people were somewhat angry that the stock market recovered so well while the economy was doing so badly,” he said. “Capital markets are a very cold, emotionless thing.”

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