Click to Enlarge This month, InvestorPlace’s Jim Woods took a look back at the hectic year in financial and global news that was 2011, rounding up the most important headlines in his list of The Top 11 Market Stories of 2011.
After that, we decided to leave it up to you, the reader. After a few days, 3,500 people chimed in with their own opinions on what truly ruled the market in 2011. The final tally can be seen by enlarging the graphic on the right, but the top five stories included an everyone-saw-it-coming blowout, as well as a couple close calls.
Bottoming out the list of the top market stories of 2011 was Operation Twist, which failed to break into double digits. It was topped by 10.) MF Global, 9.) The Arab Spring, 8.) Occupy Wall Street, 7.) Steve Jobs’ death and 6.) Osama bin Laden’s death.
Continue reading as InvestorPlace takes a closer look at the readers’ top five market stories of 2011:
#5: S&P Outlook Downgrade
In April, ratings agency Standard & Poor’s downgraded its outlook on the U.S. debt to negative from stable. Then in August, the agency cut its long-term credit rating for the first time in the history, lowering it one notch from AAA rating to AA-plus. In a statement accompanying the downgrade, S&P said, “We lowered our long-term rating on the U.S. because we believe that the prolonged controversy over raising the statutory debt ceiling and the related fiscal policy debate indicate that further near-term progress containing the growth in public spending, especially on entitlements, or on reaching an agreement on raising revenues is less likely than we previously assumed and will remain a contentious and fitful process.”
Translation: The lack of political will in Washington to address the nation’s fiscal problems is the reason for the downgrade.
#4: Extreme Volatility
The market saw some wild price swings this year, and since August we’ve seen stocks go from angry bear to jubilant bull seemingly at will. We witnessed multiple days of 300- and 400-point swings in the Dow, and big spikes in the CBOE Volatility Index, or VIX. The rampant volatility in stocks caused traders some big headaches this year, as many were caught long when the market tanked, and short when the market surged. This extreme volatility has made 2011 one of the toughest years for investors trying to time the market.
#3: Japan Earthquake and Tsunami
The devastating earthquake off the coast of Japan created one of the worst tsunamis in that country’s history. Then the real damage came, as a near meltdown took place at nuclear plant in Fukushima. The economic and human costs of this tragedy will never be fully known, but suffice it to say that this natural disaster literally and figuratively rocked the entire world.
#2: Debt Ceiling and Congressional Supercommittee Failure
The aforementioned S&P downgrades can be directly linked to Washington’s political gridlock on issues such as lifting the debt ceiling and reining in debt.
The failure of the congressional supercommittee to manage to curtail the rate of spending by a meager $1.2 trillion over the next 10 years highlights this massive failure on the part of our elected representatives to do their jobs.
#1: European Debt Crisis
One huge reason for the crazy volatility in stocks was Europe’s debt crisis. The euro zone is facing serious fiscal issues, with Greece, Italy, Portugal and Spain all staring down the barrel of potential sovereign debt defaults. The financial turmoil in the region forced the Greek and Italian prime ministers to resign, and only recently have European leaders cobbled together some sort of coordinated effort to bail out the region. Failure to find some sort of short-term solution to the region’s fiscal woes threatened a major meltdown in global markets, and whether the most recent European deal will succeed is far from determined.
Fear of this kind of pernicious European debt contagion — and the stranglehold it had on U.S. markets — made this the biggest market story of the year.
Check out InvestorPlace.com’s other looks back at 2011 and ahead to 2012 here.