"Life is but a walking shadow, a poor player that struts and frets his hour upon the stage, and then is heard no more; it is a tall tale, told by an idiot, full of sound and fury, signifying nothing."  Macbeth, Act V, Scene V

Recall with me, if you will, 12/31/2010, the broad market S&P 500 Index closed the year at 1,257.64.  Fast forward to 12/30/2011 (last trading day of the year), and the S&P 500 closed at 1,257.60.  The index dropped four basis points (0.003%!), essentially flat, so 2011 must have been a boring year, right?

Cue the Bard. While U.S. corporates cranked out record profits, amassed unprecedented levels of cash and stock valuations (P/E ratios for all you gear-heads), dropped to amazingly low levels, the financial markets weathered exceptional fits of volatility on geo-political issues in North Africa and the Middle East, Japan's natural disasters, the European debt crisis (du jour) and political gridlock in Washington. And the market only moved four basis points - 4 bps!  That's the "full of sound and fury, signifying nothing" part.

In a spirit of equal time, the blue chip Dow Industrials was up 5.5% while the tech-heavy NASDAQ slipped 1.8% for the year. U.S. equities outshone world markets though, with Europe exchanges off mid-to-high teens and Asian houses down high teens to mid-twenties. 

Reminds me of the comment I read in the business section of a Canadian newspaper in September: "The U.S. economy is the best looking horse at the glue factory.”  While many bemoan the speed and strength of the recovery, for the past three years, equities have tracked post-WWII recession performance remarkably well -- great the first year, good the second then flat the third.

So what about 2012?  Fundamentals look quite positive for the U.S., but as 2011 demonstrated, results pale in the light of headline news.  We have many of the same issues as 2011, hopefully not another earthquake/tsunami, though the presidential primaries and election will bring a whole new dynamic to the market. 

O.K., so here's my forecast: fundamentals win out (actually, equities stage a furious comeback after election day -- whatever the result) and the S&P 500 ends the year at 1400, up about 11%.

Many best wishes to all for an extremely bright 2012, and let's get out there and serve the philanthropic needs of the citizens of North Carolina!

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