S&P higher than average increase regardless of seemingly endless analyst concerns
San Francisco, CA -- (SBWIRE) -- 01/14/2013 -- Many had good reason to be wary of the stock market in 2012, but caution likely did not serve them well.
Despite the plethora of fears that the eurozone breakup, global financial crisis, and looming fiscal cliff posed, and despite the fear of China having overstepped with their estate construction and on its way to a very hard landing, the U.S. S&P 500 stock index ended up 13.4% for the year.
The Dow Jones industrial average gained 7.3% for the year, with a 13,104 on December 31.
The finish is evidence that the economy and the stock market can be a difficult place to understand, predict, and navigate.
The S&P 500 still has not regained all the lost luster from 2007 and march of 2009 when it experienced serious drops to the tune of 57% to 676. The index has, however climbed up more than 100% since the days of severe financial concerns but remains below its 2007 high of 1,526.
The 13.4% gain over the course of 2012 was not a small feat, when economists were consistently concerned with global collapse and double-dip recessions for some of the world's biggest economies. The average year in the stock market sees a 9.8% increase. Despite the strength, the U.S. Economy remains stuck in a lackluster pattern, growing at a mere 2%, rather than the 4% that some would expect to get the job market back on track.
Analysts are now debating whether the stocks have improved a little too much, given the ongoing risks in the local and worldwide economy. Some still argue that if the U.S. Lawmakers can move past the squabbling they seem so intent to continue the market will rally well in relief.
"The global economy stumbles into 2013," said economist Ethan Harris of Bank of America Merrill Lynch. He doesn't think the "uncertainty shock" of the fiscal cliff will be resolved until spring.
For many, the most nerve-wracking days of the 2012 fiscal year came in the second quarter, as many worried that Spain was destined to fall short of raising the money its government required to pay exorbitant interest rates, while European banks were threatened by investments in government bonds. At the same time, the Greek economy was buried in debt and it seemed to have on way out unless it removed the euro. The totality of the prospect left analysts fearful of the worst.
The turning point of those fears came when bailouts were provided, as well as when the European Central Bank President Mario Graghi promised to do “what it takes” to keep the eurozone intact. The U.S. Federal Reserve Chairman Ben Bernake provided further mental relief when he provided another round of stimulus know as “quantitative easing,” that kept investors reiterating the phrase “Don't fight the Fed.”
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