After 2020’s Incredible Stock Market Rally, Know Your Risk Tolerance

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The past year has been an especially bizarre one for investors. The COVID-19 pandemic drove the economy into a deep recession this spring. At first, the stock market reacted as one might expect: by late March, the S&P 500 had fallen 30% in 2020.

Since then, low interest rates, a flood of liquidity, and growing excitement about the transformative potential of many technology companies have powered a remarkable rally. By the end of the day on Wednesday, the S&P 500 was up 14% for the year. The tech-heavy Nasdaq-100 has fared even better and is up 45% year to date. Even that pales in comparison to the performances of some companies that have prospered in 2020. Zoom Video Communications (NASDAQ: ZM) stock has surged 466% this year, while Tesla (NASDAQ: TSLA) stock has rallied 669%.

^SPX Chart

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