2011 S&P 500 Market Performance Recap
As we start the new year, we would like to recap a bit of 2011. We can’t quite remember a year like 2011, but then again we say that every year. It was a year divided almost evenly into two distinct halves, both defined by distinct ranges. The first half of the year (essentially 1260-1360 range on the S&P 500) had a bullish tone, tempered by the disaster in Japan, the uprisings in the Middle East/North Africa (MENA), the ongoing European debt “Whack-a-Mole” half-solutions, and the beginnings of the what would be very contentious U.S. debt ceiling debates. The second half of the year (around 1120-1260 on the S&P) was extremely volatile due to heightened Euro Zone debt concerns, potential contagion, and of course the politics of brinksmanship out of Washington.
The Euro Zone tinderbox calmed down to end the year, ostensibly due to the appointment of technocrats (that is, economists/establishment types) to run Greece and Italy, the Federal Reserve extending “dollar swap lines” to virtually anybody and everybody so banking systems wouldn’t freeze up, the European Central Bank buying sovereign bonds of periphery “moles”, the ECB lowering its key interest rate (finally!), and the ECB extending Euro Zone banks near limitless liquidity to prevent a banking crisis. The latter exercise, termed Long Term Refinancing operation (or,” LTRO”) along with a planned second LTRO in early 2012 (essentially end-around quantitative easing, or QE where the central bank backstops the sovereign debt markets of Euro Zone countries…err..I mean “moles”), took a “Lehman” event off the table in many market participants eyes and allowed for a restful last several weeks to end the year. Volatility declined sharply, we suspect due the Fed and ECB activity, as well as fund managers putting cash to work in “winning” stocks to end the year. To end 2011, there was no big Santa Clause rally or Red Rider BB Gun; but, something did make our eyes bug out of cracked glasses at 4PM EST.
In our eyes, it was the most remarkable event of the year – the S&P 500, the best measure of the large cap U.S. equity market – ended “UNCH.” That is, with all the hoopla, the handwringing, the doomsaying, the protests, the overthrows, the campaigning, and the central banking, the S&P 500 “occupied” 1257.60 on December 30, 2011, almost exactly unchanged from 1257.64 on December 31, 2010. A truly remarkable ending to a truly remarkable year.