That Was the Year that Was

January 12, 2009
Special Feature

By almost any measure, 2008 will go down as one of the worst years in Wall Street history. Just about every investment category suffered big-time losses, led by emerging markets and followed closely by domestic equities.

By almost any measure, 2008 will go down as one of the worst years in Wall Street history. Just about every investment category suffered big-time losses, led by emerging markets and followed closely by domestic equities. Bond investors turned out to be the winners, as the Barclays Long-Term Treasury Index soared more than 24% for the year while the Intermediate-Term Treasury Index posted an 11.35% gain.

On the other side of the ledger, the Lipper Emerging Market Index lost more than 53%. In the meantime, the major market averages were plunging to their biggest losses since the Great Depression, with the Dow Jones Industrial Average down almost 34%, the S&P500 down 38.5%, and the Nasdaq Composite down 40.5%.

Commodities were no safe haven, either. In addition to the precipitous collapse in oil prices—down more than 53% for the year and about 70% since coming close to $150 a barrel—copper prices also took it on the chin, along with agricultural commodities like corn and wheat. Among the precious metals, gold was the only winner, with a gain of just under 4% for the year. Platinum was down more than 38% and silver more than 24%.

With the federal government pulling out all the anti-recession weapons in its armory, several optimistic Wall Street forecasters see a turnaround in 2009, looking for double-digit gains in the S&P500. Some are even looking for a surge that would add more than 25% to the 500 index. As welcome as that upturn would be after last year’s carnage, it would take two years of those 25% gains to get the index close to the high it reached in late 2007. If the market just returns to its historical average annual gain of about 12%, it would take almost 4 years for the stock market averages to get back to where they were at the start of last year.