The stock market's rally through 2021 blew Wall Street's forecasts out of the water

• The S&P 500's 27% surge through 2021 thrashed nearly every Wall Street forecast from last December.
• The market ripped higher as vaccine rollouts, reopening, and new stimulus boosted optimism.

Even the most bullish analysts didn't expect the stock market to soar as high as it did throughout 2021.

The S&P 500 ended the year with a mammoth 27.2% gain after closing at 4,766.18 Friday afternoon. The rally marks a third straight year of double-digit growth for the benchmark and trounces its 16.3% jump from 2020. The index also enjoyed 70 record closes as investors cheered on the economic recovery.

That overwhelming optimism surpassed all of Wall Street's full-year projections from 12 months ago. JPMorgan held the most bullish outlook going into 2021, with its S&P 500 target of 4,400, implying a 17% climb. Goldman Sachs and UBS followed with projections of 4,300 and 4,100, respectively.

Bank of America, Societe Generale, and Citigroup shared the Street's most bearish target of 3,800 at the end of 2020. Had the projection rung true, the S&P 500 would've only crept 1.2% higher.

To be sure, the banks repeatedly lifted their targets as stocks ripped higher. The aforementioned estimates were from December 2020, and several developments boosted sentiments in the following months.

Vaccine approvals and rollouts in early 2021 served as a major step toward fighting the coronavirus and opened the door for reopening. The reversal of lockdown measures led many to return to work and unleashed a wave of pent-up demand. After a year of restrictions, layoffs, and closed doors, the economy finally took strides toward a new normal.

The US also got more stimulus support early in the year, albeit not as much as it enjoyed in 2020. Democrats passed a $1.9 trillion stimulus package in March, giving the economy more fiscal aid just as vaccines started hitting arms. The plan included $1,400 payments, an extension to enhanced unemployment benefits, and an expansion to the child tax credit. The months following the plan's passage saw spending surge as Americans put the direct aid to use.

Investing wasn't all smooth sailing over the last 12 months. Daily COVID cases hit then-record highs in January as the virus's winter resurgence crept into the new year. The Delta variant drove cases higher again in July and August, and the Omicron variant is now powering the sharpest ever rebound in cases. Though the US never returned to the strict lockdowns seen in 2020, each wave has dragged on consumer confidence and slowed the pace of the economic recovery.

Markets also contended with the Federal Reserve pulling back on its policy support. In November, the central bank announced it would start reining in its emergency purchases of Treasurys and mortgage-backed securities, signaling a pivot from providing aid to fighting historic inflation. The Fed doubled the pace of its tapering in December, and officials' projections suggest the central bank will lift interest rates three times in 2022.

Omicron's spread and the Fed's pullback have left banks with wildly different expectations for how stocks will fare in the year ahead. Firms' S&P 500 targets boast the second-largest gap in a decade, according to Bloomberg data. Analysts at Morgan Stanley and Bank of America expect the benchmark to close lower at the end of 2022, with the banks touting projections of 4,400 and 4,600, respectively.

If Morgan Stanley's target rings true, the index's annual slump of 7.7% will be the largest since the financial crisis.

Others expect the party to rage on into 2023. Oppenheimer held the highest 2022 target of 5,330 as of December 13, while BMO, Credit Suisse, and Goldman Sachs followed with estimates of at least 5,100.

The market's future remains highly uncertain as COVID spreads rapidly and the economy remains far from fully healed. For now, investors can celebrate the target-defying gains they enjoyed over the past year.