Stocks continued their 2021 ascent on Friday, with gains for all three of the major market indexes.

The Dow Jones Industrial Average, S&P 500, and Nasdaq Composite all spent time in negative territory during the day, but a late-day push boosted them to set a trio of all-time records.

Index

Percentage Change

Point Change

Dow Jones Industrial Average (DJINDICES:^DJI)

0.18%

57

S&P 500 (SNPINDEX:^GSPC)

0.55%

21

Nasdaq Composite (NASDAQINDEX:^IXIC)

1.03%

135

Data source: Yahoo! Finance.

The strong Friday session finished an extremely healthy first week of the year for the stock market. Now, some optimistic investors are wondering whether 2021 could be an even better year for markets than 2020.

Weekly gains for markets

When you add up the performance for the week, the Nasdaq once again reigned supreme. All three benchmarks rose between 1.5% and 2.5% for the week, with the Dow lagging as it did throughout last year.

^DJI Chart

^DJI data by YCharts.

Obviously, if you project those returns out for a 52-week year, you can draw all sorts of crazy conclusions. Notwithstanding the immense positive momentum we saw in 2020, there's simply no way that the stock market is going to consistently rise as quickly as it did this week.

The good news, though, is that thus far, the rise for stocks has been extremely broad:

  • Some of last year's favorite stocks have kept up the pace in the new year. Crowd favorite hydrogen fuel-cell specialist Plug Power (NASDAQ:PLUG) has soared 57% in the first week of 2021, for example.
  • Other stocks in areas that aren't typically big performers have done well, too. Industrial stalwart U.S. Steel (NYSE:X) has picked up 32% to start off the year.
  • Marijuana stocks got a pick-me-up to start 2021, with election results stoking enthusiasm about the potential for federal decriminalization of cannabis. Cronos Group (NASDAQ:CRON) rose more than 30% this week, and other pot stocks had sizable gains.
  • Even some long-forgotten former highfliers got some of their mojo back this week. 3D Systems (NYSE:DDD) soared more than 125% as the company managed to sell off an ancillary business and said its sales for the quarter were far better than most had anticipated.

There's considerable excitement in the investing community. Whether that will translate into big gains beyond the first week of the year depends on several factors.

Wood cubes turning from 2020 to 2021.

Image source: Getty Images.

Leaving 2020 behind

The most important question in 2021 will be whether companies bounce back fully from the economic disruptions of the COVID-19 pandemic. If the U.S. can effectively and promptly administer vaccines, then chances of controlling the coronavirus will improve, potentially setting up favorable comparisons for 2021 against pandemic-hit 2020 figures. However, if the vaccination program stalls and case counts remain high, then this year could be even worse than 2020.

In addition, investors should keep in mind that beating the market depends on which market you're talking about. The Dow was up less than 10% even after taking dividend income into consideration, the S&P almost doubled that gain with an 18% rise, and the Nasdaq soared almost 45% on a total return basis. It's more likely that we'll see 2021 returns in the teens than that we'll get another 40% to 50% jump.

Finally, despite last year's gains, many stocks are still sharply lower from where they were this time last year. For them, even getting back to even would be a huge accomplishment. Meanwhile, highfliers with huge gains last year might have built up high hopes, but just holding onto a high stock price would be a win for long-term investors.

2021 has gotten off to a strong start, but there will inevitably be bumps in the road along the way. Here's hoping that we all have a happy, healthy, and prosperous year, regardless of what the stock market does. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.