By Jack N., Communications Analyst and Blog Contributor
Do you like reading year-in-review lists? Me too. So without further ado, I humbly offer up my list of top financial and stock market stories for 2012. Feel free to agree, disagree or add your own.
Election 2012: The Economy in the Spotlight
The economy was everything in the 2012 election. Mitt Romney promised that he would bring his proven job-creation skills to the White House, and focus on keeping taxes low and businesses growing. President Barack Obama noted that the economy was turning around and asked for more time to keep things going. In the end, voters stuck with the president, the markets groaned and proceeded to fall for about a week and then largely recovered.
Fiscal Cliff Fiasco
|Congress and the president began driving toward the fiscal cliff in August 2011 when they reached a deal to automatically cut almost everything in the federal budget and raise taxes on almost everyone in the not-so-distant future. The future is now, and the fiscal cliff issues remain unresolved as I write this. Nervous investors aren’t sure what to do, while some nail-biting corporate executives continue to reduce their revenue and profit forecasts. Others decided to issue large one-time special dividends to avoid possibly higher tax rates in 2013.|
U.S. Housing Makes a Humble Comeback
|Will we look at 2012 as the year the housing market turned the corner? Maybe. Most indicators pointed steadily upward. The Commerce Department reported that new home sales in October increased by 17 percent over October 2011, while existing home sales rose 10.9 percent, according to the National Association of Realtors. Prices were up more than 1 percent through November, according to the S&P/Case-Shiller Home Price Indices. Robust would be too strong a word for the housing industry, but “nicely recovering” probably describes it accurately.|
Jobs Picture Brightens
The unemployment rate ended the year at an official 7.8 percent range, according to the U.S. Labor Department. That’s still high, but at least that’s down from 8.7 percent at the end of 2011.
The opportunity to buy shares of Facebook, Inc. (FB) brought millions of eager new investors. Unfortunately, one of the most anticipated, largest initial public offerings in stock market history turned out to be a tough lesson as the stock dropped below its opening price and has yet to recover. On top of that, delayed trade executions led to confusion for many who tried to get in on the first day.
Apple Goes to No. 1
In August, Apple, Inc. (AAPL) became the largest company ever based on stock market capitalization, topping Microsoft Inc.’s December 1999 high of $616.34 billion, according to the Wall Street Journal. Apple’s total stock value reached about $660 billion in September. Shares have fallen since then, but in mid-December it was the largest publicly-traded company in the world, with Exxon Mobil Corp. (XOM) the second largest.
Federal Reserve Launches QE3
In September, the Federal Reserve said it would spend $40 billion a month (for an indeterminate time) to buy mortgage-backed securities. And thus it began the third version of quantitative easing (or QE3). The Fed amplified QE3 in December by announcing it would buy $45 billion in Treasuries each month. Traders and investors hoped that QE3 would help along the markets, which began rising when the first two rounds of quantitative easing were undertaken from early 2009 through mid-2011.
U.S. Stocks Continue Their Rise
Except for a late spring doldrums (including a weak jobs report that knocked it down more than 2 percent on June 1), the U.S. stock market shrugged off a truckload of so-so economic data and relatively weak corporate profits and continued on a bull run that began in early 2009. It’s worth noting that the best U.S. sector through Dec. 18 was financials, based on the MSCI’s U.S. sector indexes. Yep, that’s the same sector with the worst five-year record among all sectors, and the one shouldering much of the blame for the start of the last recession.
Profits Reach a Record High, Wages a Record Low
In the third quarter of 2012, U.S. corporate profits as a percentage of gross domestic product hit an all-time high. For the quarter, profits hit $1.75 trillion, 11.1 percent of GDP, according to CNNMoney.com despite a rash of companies previously warning about declining earnings. A large part of the reason was that worker wages fell to the lowest-ever share of gross domestic product, 43.5 percent of GDP.
Sandy Halts the Stock Markets
The U.S. stock exchanges closed Oct. 29 and Oct. 30 as Hurricane and/or Superstorm Sandy crushed the eastern seaboard with wind, rain and storm surge. It was the first weather related closure of the New York Stock Exchange since 1985, according to Yahoo! Finance.
Europe Flames Out
Unemployment continued to rage in Europe and a continent-wide recession looks to be in place. But all eyes in 2012 focused on Greece (and a few on Spain), where protesters and rioters took the streets to denounce measures mandated to keep the country in the Eurozone. In November, the Greek parliament officially accepted the euro deal, and attention turned to Italy. Check back this time next year, and we’ll tell you how that turned out.
Which event most influenced your portfolio in 2012 and why?
Jack N. is a communications analyst at Scottrade. He works to demystify the markets and the economy for all types of investors and traders.
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