2011: A Capricious Year in Review

This post was originally published in the Washington Business Journal’s WBJBizBeat Blog. | Washington Business Journal

Global equity markets had a challenging year. The S&P 500 was up 2.1% (all dividend return), Russell 2000 (small companies) -4.2%, MSCI EAFE (developed international) -14.8%, MSCI EM (emerging markets) -20.4%. Many of these markets had some of the most volatile years on record. From its high point on April 29 to its lowest level on October 4, the S&P 500 declined 19.4%. The headlines in the summer and fall regarding U.S. and foreign debt problems caused markets to be extremely skittish. Since August 1, the S&P 500 experienced 2% or greater volatility on 32% of all trading days. It moved more than 3% on 11% of all trading days. No wonder investors feel a bit beaten up.

So, where was the best place to be in 2011? U.S. bonds. U.S. 10 year Treasury rates fell from 3.5% at the beginning of 2011 to below 2% at year end, hitting a record low in September of 1.67%. 30 year Treasury bonds had nearly a 30% return. Most intermediate bond funds showed returns of 6-12%.
U.S. municipal bonds fared equally well. Low rates have helped borrowing governments reduce their cost of debt. Meredith Whitney’s prediction of “hundreds of billions of dollars” of municipal defaults proved incorrect.

Europe, Europe, Europe! Global bonds fared much more poorly. Ongoing credit concerns, sovereign debt rescue plans, downgrades, Greek debt restructuring, and more roiled the European bond markets. At the end of 2011, 10 year borrowing rates for Italy and Spain had risen to over 7%.
Gold was + 10.1%, silver was -10%.

At year end, U.S. debt outstanding of $15.25 trillion (public and government owed debt) surpassed the U.S. GDP (size of the US economy) for the first time since the 1940s. Not good.

The top grossing movie in the U.S. was “Harry Potter and the Deathly Hollows, Part II” which grossed $381 million. U.S. total movie box office was over $10.1 billion.
The top Google search in 2011 was “Rebecca Black” (of the infamous “Friday” song).
Top Yahoo search was “iphone.” I guess Yahoo skews to a slightly older demographic?

There were more than one trillion playbacks on YouTube in 2011, equating roughly to 140 views for every person on the earth. The #1 viewed video in 2011 was…. again… Rebecca Black, “Friday.”