2010 is gone and we are now a couple of weeks into 2011.  It’s amazing to me how the memory works.  As I reviewed what happened last year, I was surprised to see how many “major” events had already been mostly forgotten.  But 2010 was a pretty dramatic year…both inside the world of finance, where I spend most of my time, and outside…where most normal people spend their time.  Let’s take a look back at the year that was 2010.  (Note: I apologize that this article is longer than my normal post, but a year is a long time!)

January

The year started with a catastrophic earthquake hitting the small island of Haiti.  The worst quake in the region in more than 200 years hit on January 12 near the country’s capital city, Port-au-Prince.  Estimates are that between 200,000 to 250,000 people lost their lives and the disaster crippled what was already one of the world’s poorest economies.  It also further weakened an already weak government and the humanitarian aid that poured in from around the world was mostly held up in a logistical quagmire.  The country continues to struggle today.

In the financial markets, it was also a tough start to the year.  The so-called “January Indicator” hinted of poor stock performance for the year and investors seemed to take the hint.  The S&P 500 Index lost about 4% for the month and other world equity indexes were on the same path.

In other news: Republican Scott Brown shocked the political world when he won a special election for Senator Ted Kennedy’s seat; Conan O’Brien hosted his last “Tonight Show;” Apple unveiled the iPad; and Toyota recalled over 4 million cars because of a sticking accelerator pedal; Alabama beat Texas to win the college football BCS Championship.

February

February brought us the first convention of a brand-new political party, The Tea Party.  Born in February 2009 as a result of the backlash against government spending, the movement grew rapidly via social networking and held their first national convention in Nashville in February.  Sarah Palin delivered the keynote address.

The world of sports brought us some big moments in February.  The New Orleans Saints won their first ever Super Bowl and brought some much-needed civic pride to a city that was still recovering from the disaster that was Hurricane Katrina 5 years earlier.

Also in February, our neighbor to the north, Canada celebrated in style with a very successful staging of the Winter Olympics.  An entire nation celebrated as the home country won gold in both men’s and women’s hockey, and the men’s final of Canada vs. the USA was one that even a non-hockey fan would appreciate.

In the markets, the US markets lost another 3% early in the month on reports that sales of new homes at the start of the year fell to the lowest level since 1963.  A rebound late in the month left the major indexes slightly in positive territory for the month.  

In other news:  After 3 months of silence, Tiger Woods issues an emotional apology during a news conference; a Sea World trainer was killed by a whale at the Orlando park; a 53-year-old software engineer, upset with the IRS, committed suicide by flying a small plane into the IRS building in Austin, TX.

March

After a very public debate both inside and outside of Washington, President Obama signed sweeping health care reform into law in March.  That debate continues to this day.

California reported that the state’s unemployment reached 12.5% in January, the highest level since they started tracking back in 1976.

The financial markets climbed a “wall of worry” all month and the US indexes finished around 6% higher than where they started the month.

In other news: the TSA started testing the controversial full body scanners which were installed in Chicago’s O’Hare airport; a team of 30 Spanish doctors completed the first ever full face transplant for the victim of a shooting accident.

April

The biggest news story in the month of April, and for several months after, was the explosion of the BP oil well in the Gulf of Mexico.  The blast killed 11 workers and set off an oil leak that lasted for three months and poured an estimated 53,000 barrels of oil per day into the Gulf.

In the financial world, rating agency S&P downgraded the government debt of Greece and Portugal and created a lot of uncertainty about the future of the European Union.  But US equities continued their move mostly higher, rallying 4% higher mid-month before settling with a slight gain from the previous month.

In other news: the US Census began; an underground mine explosion in West Virginia left 29 people dead in the worst coal mining disaster since 1970; Duke beat Butler in the NCAA final to win its fourth basketball title; a volcano in Iceland erupted causing a huge plume of smoke and ash over Europe and forced the cancellation of 95,000 flights  in just one week; Arizona governor Jan Brewer signed one of the most stringent, and controversial immigration laws in the country.

May

It was a relatively quiet month for world news, so most of the attention fell to the financial markets where, on May 6^th, the Dow Jones Industrial Average fell nearly 1000 points in only a few minutes.  The index recovered most of those losses within minutes and the biggest one-day decline in the history of the Dow became known as the “Crash of 2:45pm.”

In other financial news, the US inflation rate fell to its lowest level in 44 years.  And the weakness in the economy meant that equity markets didn’t fare so well.  The SP 500 Index lost over 8% for the month, almost completely erasing the gains so far in the year. 

In other news: an attempted bomb plot shut down Times Square on May 1^st when a terrorist tried to blow up an SUV filled with explosive materials; Britain elected David Cameron as Prime Minister to replace Gordon Brown; 13.5 million viewers tuned in for the series finale of “Lost”, which left many fans frustrated with the many questions still unanswered.

June

What the month of May lacked in news, the month of June more than made up for it.  And many of the headlines surrounded the world of sports.  South Africa welcomed soccer fans from around the world as the World Cup was played for the first time in Africa.  It was truly a global event and drew interest from non-soccer fans.  I even watched a few games, but couldn’t stand it for too long because of those annoying vuvuzela noise makers.

Stocks fell to their lowest level of the year in early June on a disappointing job growth report.  The markets recovered, but continued fears of economic weakness and the effect of the European debt crisis drove the markets sharply lower by the end of the month.  The SP 500 ended 5% lower on the month and hit what would be its lowest point of the year.

In other news: the Chicago Blackhawks won the Stanley cup for the first time since 1961, ending the longest drought of championships in the NHL; the Lakers won the NBA title over the Celtics in a 7-game series; the longest tennis match ever finally ended after American John Isner defeated France’s Nicholas Mahut 70-68 in a match that last over 11 hours and spanned three days; General Stanley McChrystal, leader of the war effort in Afghanistan, resigned after a “Rolling Stone” article; and nine Russian spies were arrested and deported…the 28-year old Anna Chapman, who was dubbed the “Sexy Spy” was a financial planner (and CFP®) in her “cover” role.

July

The two biggest stories both involved the US government.  On July 21, President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act, the most sweeping financial reform in the US since the 1930s.  It was another controversial bill pushed through by a Democratic majority that continues to be debated today.

The other major story occured when Wikileaks released the first wave of thousands of classified military intelligence documents from 2004-2009.  The documents revealed information on what the US knew about the Taliban, Iran and Afghanistan.  The website released several more documents through the rest of the year.

The financial markets showed some signs of recovery.  The S&P 500 bounced off the its year-to-date low and rallied more than 5% for the month.

In other news:  Longtime NY Yankees owner George Steinbrenner dies at the age of 80; the US House Ethics Committee charged longtime congressman Charlie Rangel with 13 counts of violating ethics rules, including a failure to pay taxes; LeBron James ended years of speculation by announcing “The Decision” that he would leave the Cleveland Cavaliers and join the Miami Heat; Chelsea Clinton got married.

August

In another busy news month, the major story came on the last day of the month when President Obama formally declared an end to combat operations in Iraq.  50,000 US troops remain in the country, but the focus of war operations was now Afghanistan and Pakistan.

On the other side of the political spectrum, Glenn Beck held his “Restoring Honor” rally on August 28^th on the Mall in Washington, D.C.  The event was billed as a celebration of America’s heroes and heritage.  Media reports on the attendance at the rally ranged from 80,000 to 500,000.

A technical stock market indicator known as the “Hindenburg Omen” flashed a “sell” signal to investors, and after an early month rally, they followed the sign.  The S&P 500 lost 4.7% for the month.

In other news: Elena Kagan became the fourth ever female Supreme Court Justice replacing the retiring John Paul Stevens; former Alaska Senator Ted Stevens was killed in a plane crash which was also carrying former NASA administrator, Sean O’Keefe, who survived; a debate flared in NY City and around the country on the Ground Zero Islamic center planned for the former site of the World Trade Towers.

September

The debate surrounding the Ground Zero mosque continued to dominate the news in early September.  After nearly a month of debate nationwide, a Florida pastor called off a planned burning of Qurans on the anniversary of the September 11^th terrorist attacks.  President Obama and Secretary of Defense Robert Gates became involved by issuing warnings that the act would put US soldiers at risk.

Facebook founder Mark Zuckerberg announced that he would donate $100 million to the Newark Public Schools.  The announcement came on the Oprah show, just a few weeks after a the movie “Social Network” (allegedly about Zuckerberg) was released.  He was later named “Time Person of the Year.”

In financial news, the S&P 500 had its best month of September since 1939.  US auto sales for GM, Ford and Chrysler beat estimates and helped bring some confidence in the economic recovery.  The S&P 500 gained over 8.5% for the month.

In other news: North Korean leader Kim Jong-Il appeared to name his youngest son, Kim John-Un to be the eventual successor to lead the country, even though the government has not formally made the announcement.

October

The story that captured the world’s attention this month occurred on October 13^th.  After nearly 70 days trapped below the earth in a collapsed Chilean mine, 33 miners were rescued through a tiny capsule in a narrow shaft.  All were in good condition after their ordeal and became instant celebrities.

On October 29^th, two US-bound cargo planes were found to be carrying suspicious packages and were grounded.  The packages were both reportedly headed to a Jewish synagogue in Chicago and contained wires and explosives.  One was reported to have enough explosives to bring down the plane.

Financially, it was another good month.  The stock of Apple closed at an all-time high and became the second largest US company by market value.  The S&P 500 rallied 3.5% in the month.

In other news:  President Obama’s Chief of Staff, Rahm Emanuel, announced that he would leave the White House so that he could run for the job as Mayor of Chicago;  Delaware Republican Senate candidate Christine O’Donnell grabbed the headlines with a campaign ad claiming that “I am not a witch.”

November

The biggest story of the month, and one of the biggest stories of the year had to be the mid-term elections that took place on November 2^nd.  A Republican tidal wave surged through Washington.  The GOP won full control of the House and gained six seats in the Senate in what most called a statement against the Obama agenda.

The financial markets seemed to like the news…at least at first.  The equity markets rallied strongly immediately after the election, but then fell back and ended the month about where they started.

In other news:  the San Francisco Giants won their first World Series since 1954, and their first since moving west;  former President George W. Bush released his book “Decision Points” and hit the talk show circuit;  North Korea fired upon a South Korean island, killing two soldiers; former House Majority Leader Tom Delay was convicted in a money laundering trial.

December

No tax increase!  On December 6^th, President Obama announced that he had reached an agreement with the new Republican majority in the House to extend the Bush-era tax cuts for all Americans for two more years.  The bill was signed into law on December 17^th.

Normally, a lame-duck Congressional session doesn’t get much done.  It certainly wasn’t the case this year.  While still holding the majority of seats, Democratic leaders and the President were able to pass several key parts of their legislative agenda.  A repeal of the “Don’t Ask, Don’t Tell” law affecting gays in military service, the new tax deal, and the “New Start Nuclear Arms Treaty” with Russia were the major pieces of legislation passed in the final days of the Congressional year.

The equity markets also finished the year with a flurry.  Some decent economic news and a bit of confidence about the recovery provided the fuel that stocks needed to stage a big year-end rally.  The S&P 500 was up 6% for the month and closed just off the highs for the year.  The index has now also recovered all of the ground it lost since the September 2008 collapse of Lehman Brothers.

In other news: a massive blizzard hit the Northeast on December 26^th, dumping more than 20 inches of snow; the storm left thousands stranded in their homes and cars and created chaos in the travel industry.

There was no doubt that with all the twists and turns and events of 2010, investors faced a major challenge in trying to stay disciplined in a volatile environment.  Most financial markets were able to log positive returns for the year, but investors had to wade through a lot of troubling news and pessimistic predictions.  As late as eight months into the year, the S&P 500 Index was down 5.9%, but finished up 15%.  The lesson?  Long-term, diversified investors were rewarded for not giving into the emotions of the year and sticking with their strategy.  If you were a client of Rall Capital Management, you were able to experience those rewards.