Market Beat: Global stock markets – looking back at 2011, forward to 2012
TRUCKEE, Calif. – Last year was a bumpy, rough, roller coaster ride for the stock market that saw the S&P 500 finish the year almost right where it began. The S&P 500 closed 2011 at 1,257.60 and it had closed 2010 at 1,257.64. Essentially it was flat for the year – Standard and Poor’s reports the annual price return at 0%.The total return for the S&P was 2.11% and the total return figure includes dividends which accounted for all of the S&P return this year. That was the smallest annual movement for the S&P 500 since at least 1947. The Dow Jones Industrial Average was up a respectable 5.6% and that included an incredible stretch in August that saw the Dow set a record by rising or falling at least 400 points on four consecutive trading days. The best performing stocks in 2011 were Apple, Exxon Mobil, IBM, Pfizer, Chevron, Wal-Mart, Master Card, Philip Morris, Visa and McDonalds. Utilities and health care were among the best performing sectors while financials and materials were amongst the worst.Global markets were another story. While the US markets held up fairly well, overseas there were some serious declines. Bloomberg calculated an almost $6.3 trillion dollar decline in global markets in 2011. Global stock market capitalization dropped 12.1% to $45.7 trillion. European markets were hit hard – the German DAX declined 14.7% and France’s CAC 40 went down by 17%.Looking ahead to 2012 it’s impossible to predict exactly what will happen, but many of the concerns that rattled global markets in 2011 still persist. Events in the Euro zone may continue to spook markets. Pimco has done a study on the impact on crude oil prices from an attack on Iran’s nuclear facilities. Its conclusion is that an attack could possibly produce an oil price spike that could have an adverse impact on the global economy.With that in mind, the main driver behind stock prices is corporate earnings. If earnings stay strong the market should perform well. There are also signs that the U.S. economy is slowly recovering, the job market has been showing signs of improvement and we should see continued GDP growth even though the rate may be slow. Brokerage firm strategists are forecasting an average gain of about 8% for the S&P 500 in 2012.This year is also an election year. Many studies have been done on the influence of elections in the stock market and the consensus is that going into an election the stock market typically performs fairly well.Kenneth Roberts is a Truckee based Registered Investment Advisor. He has been a Truckee resident for 24 years. Ken has been in the securities business since 1992, has worked as a branch manager for a major Wall Street firm, and is currently a portfolio manager for Fusion Asset Management who specializes in target retirement and income producing portfolios. Information on his money management service can be found at http://www.fusiontargetretirement.com or by calling 775-657-8065. Past performance does not guarantee future results. Consult your financial adviser before purchasing any security.