I love a good comeback story. As a baseball fan and native of Boston, my favorite comeback is the Boston Red Sox in 2004, who overcame a 0-3 deficit against the New York Yankees in the American League Championship Series to force a game seven, win the ALCS, and then go on to win the World Series, to reverse Boston’s 86-year-old “curse.”

Another dramatic turnaround: the coronavirus-era stock market.

Roughly 12 months ago, on March 23, 2020, the U.S. stock market hit rock bottom, after extreme volatility that witnessed jaw-dropping swings in both directions. One year later, equity prices hover near record highs.

Uncertainty remains, of course, and market action in recent days has been volatile. The three major U.S. stock market indices fell Wednesday, the Dow Jones Industrial Average by 3.09 points (-0.01%), the S&P 500 by 21.38 points (-0.55%), and the NASDAQ by 265.81 points (-2.01%).

In pre-market futures contracts Thursday, all three indices were bouncing back and trading in the green. Let’s examine the remarkable year-long recovery of the stock market and see what it teaches us moving forward.

Up and down, over and out…

My favorite crooner, Frank Sinatra, engineered a triumphant comeback of his own, in the early 1950s. In the song “That’s Life,” he sang:

Each time I find myself flat on my face,
I pick myself up and get back in the race…

In February-March 2020, the economy and global stock markets were flat on their face.

Unemployment in the U.S., the world’s largest economy, was at 3.5% at the end of February last year, the lowest rate in half a century. Then the coronavirus outbreak became apparent and unemployment skyrocketed to 14.7% in April, the worst jobless level since the Great Depression. Every advanced and emerging economy had either lapsed into a recession or outright depression.

Read This Story: The D-Word: How Bad Will The Economy Get?

For much of 2020, the bad news kept coming. And yet, like the Energizer bunny in the commercial, the stock market during the past 12 months has kept going and going and going.

What accounts for the stock market’s remarkable comeback? One factor is the disproportionate share of the overall market that’s comprised of mega-cap technology stocks, which actually saw greater business during COVID-19 lockdowns. In recent months, stock market breadth has improved, which strengthens the bull argument.

Fiscal stimulus on a massive scale also played a role. First came the $900 billion stimulus bill under the Trump administration, followed by the $1.9 trillion relief package signed by his successor President Biden. And now, Biden is proposing a new $3 trillion spending bill that would repair America’s crumbling infrastructure and help retool the economy toward advanced technologies, such as renewable energy.

Monetary stimulus has kept stocks aloft as well. The Federal Reserve has vowed to keep interest rates low and continue its bond-buying program, to pump liquidity into the markets. Inflation is rising but it’s still not a major threat and currently runs below the Fed’s target of 2%.

Corporate earnings are where the rubber hits the road. After all, stock prices are based on projected future profits. On that score, good news has arrived as well. Corporate profits over the last few quarters have exceeded expectations and they’re expected to post double-digit quarterly growth for the rest of 2021.

One of the biggest and most welcome surprises for me has been how swiftly the world’s scientists developed safe and effective COVID-19 vaccines. Historically, it has taken many years to develop a vaccine from scratch. That’s why the emergence of coronavirus vaccines in such a short time span is nothing short of miraculous. The world’s scientists deserve a collective salute.

From trough to peak…

All three major U.S. stock market indices bottomed out on March 23, 2020. Since then, the Dow Jones Industrial Average, the S&P 500 and the technology-intensive NASDAQ have urged, making the past 12 months one of the best year-long rallies since the end of World War II (see chart).

April 2020 was a quick reversal of the fastest bear-market decline in 90 years. Through February and March of that year, the major stock averages plunged about 40% in only 28 trading sessions. From February 24-28, stock markets worldwide posted their largest one-week declines since the financial crisis in 2008.

Sentiment executed a 180-degree turn in April. Unprecedented fiscal and monetary stimulus, combined with tentative steps toward reopening economies, lifted investor moods.

The stock market’s crash in Q1 2020 and its subsequent comeback underscore a timeless investment lesson: never panic. If you had dumped your stocks when the market hit its nadir, you would have locked in substantial losses.

The economy is improving, the bull market is intact, and the roll-out of vaccines provides hope that we’ll get the coronavirus pandemic under control. Now’s not the time to get into a defensive crouch. Hedge your portfolio against future risk, sure, but if you get too cautious, you’ll leave money on the table.

That’s why our investment team has put together a special report: “5 Red Hot Stocks to Own in 2021.” In this report, we provide the names and ticker symbols of the highest-quality stocks to own for the market’s resurgence. Click here for your copy.

John Persinos is the editorial director of Investing Daily. You can reach John at: mailbag@investingdaily.com. To subscribe to his video channel, follow this link.