We were surprised like most market participants by the record volatility in the market and the insidious correlation. The phrase “risk on” and “risk off” became the new descriptor for market behavior in 2011. The last day of November the S&P 500 moved over 4.2% alone nearly erasing the entire month’s loss. If you weren’t 100% invested you missed out on the whole month. There’s an old saying that the market figures out how to screw the most people most of the time. Whether you were long or short, Mr. Market had a trick up its sleeve for you.
For all the record volatility 2011 has provided investors it’s cruelly ironic that the market was virtually, unchanged for the year; that it’s down .04 points. The December 30th 2010 close of the S&P 500 was 1257.64. December 30th 2011 the S&P 500 closed at 1257.60. Yet in August and September alone, the Dow Jones Industrial Average rose or fell by more than 1% on 29 days and there were 15 days with final moves of more than 2%. How is it possible that the market only moved .003% for the entire year? I tell you, it’s perverse. This will go down as one of the greatest anomalies in history.