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American Stocks in 2011: Flat

Written by Gary North on January 2, 2012

The Standard & Poor’s 500 index was flat, to the dollar, in 2011. That has not happened in 60 years. On Friday, December 30, the index was 1257.60.  In 2010 at this time, it was 1257.64. This is statistically astounding.

Yet the year was a roller coaster ride. Up, down, up, down” the investors never decided where the market was headed. So, the S&P 500 was like Kenny Rogers’ gambler: it broke even.

The dollar was a little lower. So, there was some loss for investors. Then there were mutual fund management fees. The investor was down again. Yet this is a pre-recession economy.

“The U.S. economic data has been experiencing some bounce in the last quarter,” said Kevin Shacknofsky, who helps manage about $5 billion in assets for Alpine Mutual Funds. “The negative is still Europe.”

Europe is heading into a recession.

The euro posted its first back-to-back annual losses versus the dollar in a decade. Spain said Friday that it will cut spending and raise taxes to slash its budget deficit. While the measures are meant to tame Europe’s debt crisis, they may make it harder to fuel economic growth.

“Spain’s numbers show that it’s very difficult to have strong economic performance while you’re trying to deleverage,” Shacknofsky said.

Then there were off-shore stock markets.

Stock indexes outside the U.S. fared poorly. The Stoxx Europe 600 index lost 11 percent. The MSCI Asia-Pacific Index slid 17 percent this year, and the MSCI All-Country World Index fell 9.4 percent. Each gauge dropped on a yearly basis for the first time since 2008.

The European benchmark index’s retreat in 2011 was led by a 32 percent drop in banks, marking the worst performance among 19 industry groups. Financial stocks also were the worst performers in the S&P 500 this year, down 18 percent as a group. Bank of America Corp. led the declines, with a nearly 60 percent drop.

“The risks in Europe will get worse before it gets better,” said Matt Brady, an executive director for foreign exchange at JPMorgan Chase. “Risk sentiment is going to be dire as we head into 2012.”

The media pump good news in the first week of January: Five Stocks to Own in 2012. This is as predictable as the supermarket check-out magazine headline: Lose Five Pounds Easily by the End of the Month. Don’t believe either headline.

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