Right Back Where We Started
Like a roller coaster car pulling back into the loading station, the Standard & Poor’s 500 finished 2011 almost exactly where it began, closing at 1257.60, down a mere .04 points. Similar to Coney Island’s famous Cyclone, the ride was far from gentle and smooth. Instead, the track was bumpy, rough and, like an old wooden coaster, gave some “riders” a bit of whiplash. During the year, market volatility and uncertainty were exacerbated by a host of world events including the earthquake and tsunami hitting Japan, the U.S. Congressional debt ceiling squabbles, the revolutionary Arab Spring and a threatened European sovereign debt meltdown. The result was a third and fourth quarter that registered more than a dozen market swings ranging from 5% to more than 20%. Only the accommodative policies from the Federal Reserve and central banks around the world were able to rescue the U.S. markets, which recovered and rebounded into year-end. Overseas bourses were less fortunate, suffering double-digit losses nearly across the board. As illustrated by the chart to the right, which details the performance of various market indices, mutual fund categories and selected foreign markets, most investors would have been wiser to take a gentle ride around the lake than hop on the equity markets’ roller coaster.
The oscillating, trendless and, unfortunately “reward-less” market that dominated 2011 is simply a microcosm of the last decade and more. The chart below plots the daily price of the benchmark S&P 500 from December 31st 1998 (red line indicating the closing value of 1229.23) through December 31st 2011 (closing value 1257.60). After two peaks and two valleys, the index is a paltry 28.37 points higher, a 0.18% annual increase, not much to show for a thirteen year ride aboard this cyclone. Here’s hoping for a better ride during the next decade.
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